It’s been a tough few weeks for the banking industry, with US lenders Silicon Valley Bank and Signature Bank collapsing and Swiss giant Credit Suisse forced to accept a takeover offer.

As a result, you might be wondering what is the likelihood of an Australian bank collapsing? And what would happen if a bank did collapse?

On the first question, it’s fair to say the chances of a local bank collapsing are highly unlikely. 

That’s because, after a string of overseas banks failed in 2007-08 during the Global Financial Crisis, the global community, including Australia, implemented a series of measures to make the banking system more resilient. 

These measures had two aims – to reduce the chances that individual banks would fail and to reduce the chances that the collapse of one bank would lead to the collapse of another.

Speaking last month – before these recent problems began – John Lonsdale, the chair of Australia’s banking regulator, APRA, told the Senate Economics Legislation Committee that people could be confident in the “strength and stability” of our system.

“There has been much work undertaken over recent years to strengthen and build resilience in the system and prepare the industry for any potential downturn,” he said.

“Prior prudential measures aimed at strengthening banks’ balance sheets and their lending standards mean that the system is well placed to absorb a more challenging period while continuing to meet the credit needs of households and businesses. Capital buffers are well above minimum requirements and APRA’s latest stress testing indicates that the banking sector will remain resilient.”

 

What would happen if a bank did collapse?

While the odds of a local bank failing are remote, of course it remains theoretically possible.

If that did happen, home loan customers wouldn’t lose any money – because they would be borrowing from, rather than lending to, the failed institution.

That said, their mortgage debts wouldn’t be magically wiped out. Instead, they would have to make their home loan repayments to the new owner (if the failed bank was taken over by a rival) or the liquidator (if the failed bank wasn’t rescued).

 

The $250k government guarantee

After the Global Financial Crisis, the federal government introduced the Financial Claims Scheme (FCS), which is more commonly known as the ‘government guarantee’.

The FCS “provides protection to deposit-holders with Australian incorporated banks, building societies and credit unions … in the unlikely event that one of these financial institutions fails”.

Under the FCS, the government guarantees to reimburse deposit-holders for deposits of up to $250,000 per account holder per institution.

With interest rates rising, it’s important to make sure your mortgage rate is still competitive – which is why so many Australians are refinancing right now.

However, refinancing can be more challenging when property prices are falling, as they are in many parts of the country.

That’s because your equity (or the debt-free share of your property) tends to fall during a declining market, which may cause one of two problems:

  1. If your equity is now lower than 20%, you may be asked to pay lenders mortgage insurance as part of the refinance – even if you’ve paid it before.
  2. If your equity is now lower than 10%, you will be limited with lenders willing to accept your refinance application.

That may seem unfair if you’ve been making all your home loan repayments on time. However, because refinancing technically involves applying for a new loan, lenders perform the same due diligence as they would for brand-new borrowers.

 

Get an expert on your side

That’s why it’s a good idea to get help from a mortgage broker, who understands the home loan market and lenders’ appetites. As your broker, I will:

If you decide to proceed, I’ll manage your refinance application from start to finish, so the process goes as smoothly as possible.

 

Two options if you can’t refinance

If it turns out you don’t have enough equity to refinance, there are two options you may wish to consider.

First, I could ask your existing lender to reduce your rate. There would be no guarantee your lender would agree, but it doesn’t hurt to ask.

Second, if you had cash savings, you could use that money to pay off some of your mortgage ahead of schedule, thereby increasing your equity. However, this isn’t the right strategy for everyone, so it would be a good idea to speak to us to discuss first.

 

Why refinancing could be profitable

By refinancing to a suitable loan with a lower interest rate, you could potentially save tens of thousands of dollars over the life of your loan.

That’s why I strongly recommend you contact me today, to see if refinancing might be right for you.

Although refinancing may be a little more complex in a declining market, I’ve been helping other borrowers refinance, and I’d love to help you too.

After rising steadily for more than two years, the average time that Australians have to wait to receive a new car has been trending down for six months.

The average waiting time rose from 34 days in June 2020 to 159 days in August 2022 and then fell to 131 days in February 2023, according to the latest data from Price My Car.

But those averages conceal large discrepancies according to state, model and brand.

Average delivery waiting times for February were:

The five shortest and longest waiting times for brands were:

The five shortest and longest waiting times for models were:

 

If you want to buy a new or used vehicle, I can help you finance the purchase.

As your broker, I can compare over 20 lenders to find the right loan for you. Keep in mind financing directly through a dealership can limit your access to lenders and options, which could cost you a lot more over the life of the loan.

Get in touch if you’d like to discuss your options.

At the Reserve Bank of Australia’s (RBA) March board meeting, it opted to raise the cash rate by 0.25 percentage points. This takes the cash rate to 3.6%, 3.5 percentage points higher than this time last year.

As interest rates have increased over the last 10 months, many homeowners have been looking for ways to save costs. One way they may have considered is debt consolidation. This can be a beneficial decision for a number of reasons but it may not be right for everyone. We explore who this might be better suited to.

Why consider debt consolidation?

Debt consolidation is where you roll multiple debts, such as personal loans, car loans and credit cards, into one account. This can help simplify repayments as it will only be one rather than multiple. It could also potentially save you money if the consolidated debt is a lower interest rate than when the debts were separate.

There are a number of ways you could consider consolidating debt. These include combining into one personal loan or adding it to your home loan.

Key considerations before consolidating debt

Consolidating debt could be beneficial for many people, however there are a number of factors that need careful consideration before choosing to do so. The main questions to ask include:

Can debt consolidation impact my credit score?

Credit scores can be impacted in the short term when lines of credit are applied for, particularly if multiple applications are made within a short period of time. However, if you consolidate debt and consistently make your repayments, it could potentially improve your score.

Why see a broker about consolidating debt?

As you can see, debt consolidation can be an effective way for some people to save money and make repayments simpler. However there are a number of considerations to ensure it is the right strategy for you. We will get to know your situation and goals and crunch the numbers for you to determine whether debt consolidation could be the right choice for you. We also have access to over 60 lenders to find one that suits your needs and offers a competitive rate.

With domestic travel booming and inbound tourism gradually returning to pre-pandemic levels, one of Australia’s leading commercial property experts believes investors may want to take a fresh look at accommodation assets.

Ray White Commercial Head of Research Vanessa Rader said Australia enjoyed a busy summer holiday period, with both domestic and international travel sharply increasing on the year before.

“There’s been strong hotel occupancy levels and new benchmarks in average daily room rates recorded across Australia,” she said.

“After a number of years of poor results, this has put the spotlight again on the accommodation sector as a viable investment opportunity from four- and five-star full-service hotels in major tourism centres through to the regional hotel/motel segment.”

Ms Rader said that while Australians were excited to resume overseas travel, many have chosen to travel domestically instead, due to cost-of-living pressures and a relatively weak Australian dollar.

“The drive segment has shown good results, with occupancy improvements across regional areas of Australia setting new highs in daily room rates,” she said.

Conversely, our weaker currency gave international visitors another reason to visit Australia over the summer. That was one reason why an average of 1,520 flights per week entered Australia during December. 

“While this is still below pre-COVID-19 results (December 2019) of 2,167 per week, there has been a vast improvement since early 2022 where just 400 flights per week were entering Australia,” she said.

Domestic tourism is booming

Ms Rader noted forecasts from Tourism Research Australia predicting that both outbound and inbound tourism would not return to 2019 levels until 2025.

However, domestic tourism is booming. Australians spent a collective 400 million nights in domestic accommodation in 2022 and are expected to average 444 million nights per year over the next five years – well above the long-term average of 310 million nights.

“Domestic tourism expenditure has already eclipsed results seen in 2019, with continued annual growth of 4.7% expected over the next five years making hotel investment attractive,” she said.

“Capitalising on this growth potential, interest in the hotel sector in 2023 will continue after a strong 2022 which achieved $3.2 billion in sales. Offshore buyers accounted for 58.4% of these sales and are likely to continue to seek out these quality, ongoing returns. 

“Savvy local groups and private investors, notably in the smaller, regional markets, are expected to remain active, however financing availability may be a stumbling block for some buyers.”

I can help you buy a commercial property in 2023. Call or email if you’d like to discuss how to finance the purchase.

Sources:

https://www.raywhitecommercial.com/research/projected-tourism-improvements-expected-to-grow-interest-in-hotels

There’s been no improvement in the time in which big businesses pay their small business suppliers, according to the newest data from the Payment Times Reporting Regulator.

The regulator recently released its latest half-yearly report – the third in its history since the Payment Times Reporting Act 2020 was legislated – and revealed that payment times have remained largely unchanged across the three reports:

The third report found that only 31% of big businesses pay their small business suppliers within 30 days, while 24% take more than 120 days to pay.

“After three reporting cycles, it is concerning that register data indicates payment terms and payment performance have not materially improved since the commencement of the scheme,” the regulator said.

“This year, we will increase our engagement with reporting entities and stakeholders to help us better understand barriers to compliance. 

“Because payment practices have not improved across recent reporting periods, we will also explore how the register can be used by small business suppliers, investors, advisers, supply chain managers and other stakeholders to incentivise improved payment performance by large businesses.”

Ombudsman demands big businesses lift their game

The small business ombudsman, Bruce Billson, said the latest payment times report made for “bitterly disappointing” reading.

“Nearly one-quarter of big businesses taking four months or more to pay their bills is just not acceptable and there is little sign of improvement by the worst performing businesses,” he said.

“This needs to be taken more seriously. Finance is the oxygen of enterprise. Cash flow is vital to these small and family businesses. There is abundant scope for big businesses to lift their game and they should.”

Mr Billson said about 40% of the requests for assistance to the small business ombudsman related to payment times.

The Payment Times Reporting Scheme aims to improve payment times for small businesses. Under the scheme, big businesses and government enterprises must report their payment terms and times for small business. 

To find out how individual big businesses are performing, you can go to the Payment Times Reports Register and download an Excel file.

The Reserve Bank of Australia has provided businesses with mixed news in its latest series of economic forecasts out to the June 2025 quarter.

On the one hand, the Reserve Bank has forecast:

On the other hand, the forecasts also suggest:

 

Economic growth

The Reserve Bank has said economic growth should slow over the next three years, due in part to rising interest rates, the higher cost of living and declining consumer spending.

However, export volumes should grow strongly, partly because of the rebound in the tourism and education industries.

 

Unemployment

The labour market is “very tight” right now, but the increase in migration “has supported robust growth in employment and is helping to alleviate shortages in some areas”, according to the Reserve Bank.

Employment growth is expected to ease over 2023, which should lead to a gradual rise in unemployment later in the year and continuing through to 2025.

 

Inflation

The Reserve Bank said the easing in price pressures that’s occurring overseas should eventually flow through to Australia.

Slowing economic growth and rising unemployment should also put downward pressure on inflation.

“Inflation could turn out to be higher than expected if the high inflation environment leads to greater feedback between wages and prices than has been typical in the inflation targeting era. On the other hand, inflation could be lower than expected if the easing in goods inflation is faster or more widespread than anticipated,” according to the Reserve Bank.

Do you want to bolster your finances by seeing if you can refinance to a lower-rate business loan? Reach out and I’ll be glad to talk you through your options.

As of 1 February, paid family and domestic violence leave has become available to employees of businesses with more than 15 staff.

This leave entitlement – which will also become available to employees of smaller businesses from 1 August – allows employees to access 10 days of paid family and domestic violence leave in a 12-month period.

Here are seven other key facts about the reform:

  1. The new entitlement applies to all employees in the Fair Work system (including part-time and casual employees).
  2. Employees must be experiencing family and domestic violence to be eligible for the leave.
  3. The leave must be used to deal with the impact of family and domestic violence.
  4. Employers can ask for evidence that this activity is related to family and domestic violence, and that it would not be practical to do this activity outside work hours.
  5. Employees are entitled to the full 10 days of family and domestic violence upfront, so they don’t have to accumulate it over time.
  6. The leave renews every year on each employee’s work anniversary.
  7. It doesn’t accumulate from year to year if it isn’t used.

How family and domestic violence is defined

According to the Fair Work ombudsman, an employee is experiencing family and domestic violence if a “close relative, current or former intimate partner, or member of their household” does these two things – “seeks to coerce or control them and cause them harm or fear” and “is violent, threatening or behaves in another abusive way”.

A close relative could be a:

 

If you or anyone you know is experiencing family and domestic violence, this Services Australia page explains where to get help.

For more information about the new paid family and domestic leave rules, visit this Fair Work page.

 

In good news for property investors, SQM Research has reported that the rental market has turned even more in their favour.

The national vacancy rate – which measures the share of untenanted rental properties – fell from 1.3% in December to an ultra-low 1.0% in January.

Vacancy rates are very low in all capital cities:

A low vacancy rate means tenants have to compete hard for accommodation. That, in turn, means property investors:

National rents jump 17.4%

Further to that last point, SQM Research has also reported strong growth in the rental rates being asked by landlords over the year to February 12.

Across Australia, the year-on-year increase was 17.4%. For individual cities, the increase was:

SQM Research Managing Director Louis Christopher said the rental market appeared to be tightening even further in February, based on a decline in rental listings.

“The ongoing surge in rents is pushing up rental yields, especially with falling prices,” he said.

“I believe ‘would-be’ investors will be attracted to higher rental yields in later 2023, provided the cash rate peaks at below 4% [from its current rate of 3.35%]. However, if the cash rate rises above 4% it is likely home buyers including investors will largely stay away from the housing market for another year, and so investment dwelling approvals will remain in the doldrums, setting us up for another super tight rental market in later 2024 and 2025.”

Are you thinking about buying an investment property? If so, let’s schedule an appointment so you can explain your individual need

Have you ever wondered what specific features buyers and renters look for when they do online property searches?

Well, PropTrack has analysed listings on realestate.com.au and discovered certain keywords enjoyed a big rise in popularity in 2022, when compared with the previous year.

For buyers, the 10 search terms (which could include just one keyword or multiple keywords) that saw the biggest year-on-year growth were:

  1. Garage, swimming pool.
  2. Air conditioning, swimming pool.
  3. Air conditioning, garage.
  4. Air conditioning, dishwasher.
  5. Balcony, garage.
  6. Ensuite, garage.
  7. Paddocks.
  8. Built-in robes, outdoor area.
  9. Shed, swimming pool.
  10. Flood.

PropTrack Senior Data Analyst Karen Dellow said outdoor features – such as garages, pools and balconies – enjoyed a big rise in popularity last year.

“With all the natural disasters Australia has experienced recently, searches for ‘flood’ were four times higher year-on-year,” she added.

 

What renters want

For renters, the search terms that experienced the biggest year-on-year increase in popularity were:

  1. Furnished, pet friendly.
  2. Pet-friendly, swimming pool.
  3. Furnished, swimming pool.
  4. Air conditioning, dishwasher, heating.
  5. Air conditioning, built-in robes.
  6. Built-in robes, dishwasher.
  7. Air conditioning, garage, pet friendly.
  8. Built-in robes, garage.
  9. Air conditioning, ensuite.
  10. Air conditioning, garage.

“What makes the renter’s list different from the buyer’s is the high demand for features that come included in the property, such as furniture, dishwashers and built-in robes,” Ms Dellow said.

“Buyers can add additional features to a property once they move in, whereas a renter relies on what is already available, making air conditioning and heating of high importance.”

I love helping renters become homeowners – especially when I introduce them to government housing incentives they may be eligible for. Book an appointment if you’d like to swap renting for owning. I’ll find the right finance for you and be by your side through the entire process.