New credit reporting system starts today

A new credit reporting regime starts today. Essentially it means that credit reporting agencies will change from a minimal reporting of credit enquiries and serious defaults to a "positive reporting" regime. They will now collect and publish data on how many times you are late with with a credit repayment. This applies to all credit products including bank loans, credit cards, utility bills and your mobile phone account.

For more information follow this link:

Carr Financial is now Loanscape

Welcome to a new world.  A world where knowledge, research, communication and quality processes reign.

A world illuminated by transparency.

A world based on loyalty and long term relationships.

A world where you will receive professional advice on how to structure and manage debt wisely.

A world where you can you tap into our network of business partners and associates to access a wide range of financial and property related services.
 
A world where we proactively focus on what helps you best to realise your dreams.

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Enter our new world

Welcome to LOANSCAPE

How Comfortable Are You? (please don't take this personally)

The latest ME Bank Household Financial Comfort Report was released in June.  This provides a welcome counterpoint to all the gloomy consumer sentiment surveys which seem to tap into our collective pessisism about the future.   How are we feeling right now?

1. Most household segments experienced an improvement in financial comfort over the past 6 months.  This has been driven by improvements in their investments, savings, capacity to handle an emergency and standard of living in retirement.  The biggest improvement is being felt by "empty nesters".

2.  The financial comfort of "retirees" has deteriorated by 5% over the past 6 months - not surprisingly given their relative high exposure to cash investments which have been affected by the decrease in bank deposit rates.  This sector is generally debt free so does not welcome interest rate cuts.

3. The top 4 worries?
   -  the cost of necessities
   -  level of savings
   -  ability to maintain standard of living
   -  the global economy

4. Despite an improvement in household savings and in investments, 56% of households are opting to direct discretionary savings towards making larger loan repayments rather than invest in direct shares, bonds or make voluntary contributions to superannuation.

So overall we are comfortable right now but worried about the future.  Nonetheless most households remain optimistic about their financial situation with half expecting an improvement in their situation over the next 12 months.

Property Outlook

The RD Data-Rismark Home Value Index for June showed that combined capital city prices increased by 3.8% during FY2013.   Activity is continuing to be driven by investors and upgraders.  However, there is no likelihood that we will see a return to the spectacular growth of previous property cycles.  Household debt remains at historically high levels:  147.3% of disposable income.  The chart below shows that this debt to disposable income ratio has not changed for the past 7 years.

The second factor affecting the property market outlook is the current trend for greater household savings; now at the highest level since October 1987.  

And finally we are seeing a welcome (in my view) change in consumer spending habits.  People are using their own money and not credit cards to make their household purchases.  There is a strong swing towards the use of debit cards with total debit card transactions increasing by nearly 14% over the year!  While credit card balances remain at relatively high levels the trend is down with average balances reducing by 3.5%.

Other factors which have influenced recent property price booms are not as significant.  There is no sharp drop expected in unemployment, interest rate cuts have been much more modest than with previous  cycles, and inflation is at much lower levels.

This overlooks the fact that each capital city market is trending differently in response to individual circumstances.  In Sydney the property market is anticipated to perform relatively strongly.  Over the past 10 years price growth has been below inflation and dwelling construction still remains insufficient to redress the demand/supply imbalance in high demand locations.  There fore we are seeing certain micro markets such as the inner west perform quite strongly.  

Acknowledgement: in preparing this Property Update we have sourced data and quoted from publications issued by Westpac Bank, RP Data and ME Bank.

Economic Outlook

Australia's national accounts for the March quarter confirmed that we are continuing to experience relatively subdued economic conditions.  GDP growth was 2.5% for the year and according to Andrew Hanlan, Senior Economist with Westpac this rate of growth will continue throughout the remainder of 2013 and 2014.  This will place pressure on employment with the unemployment rate expected to rise to 6.2% by mid 2014.  

Westpac's June 2013 Market Outlook cites the following as the major influencing factors:

• global growth remains below trend
• the Australian mining investment boom has peaked while conditions in other major sectors are being held back by the continuing strength in the Australian dollar and the propensity for households to reduce debt rather than to increase spending.  Housing construction is flat and business investment is down by 4.3%.
• public sector demand (23% of the economy) is contracting as governments seek to balance their budgets

ut there are some positive signs too.  A strong upswing in exports is under way:  export volumes are up by 8% over the year with resources exports up by 13.2%.  Interest rates have been reduced over the year and this is beginning to impact new residential building activity.  However, more significantly the larger home renovation sector continues to weaken.

Interest rate cuts have had limited impact to date.  Those with mortgages are taking advantage of the lower interest costs to pay down debt more quickly, rather than to increase spending.  This reflects relatively low consumer confidence influenced by the soft labour market and moderating wage incomes.

Finance Market Summary

All major and 2nd tier lenders have responded to the Reserve Bank's decision to lower the cash rate to 2.5% pa by announcing similar reductions to their standard variable rates commencing this week. The standout was Westpac which moved by 28 points, although it still has the highest varaible rate of all the majors.  Over the past few months 1 to 3 year fixed rates have continued to trend down with leading fixed rates over these terms remaining below the best discount variable rates.  

Overall the Sydney property market remains supply constrained.  This has lowered the level of lending activity so many lenders are releasing special offers to attract higher volumes.  If you have a loan that is more than 4 years old it is a good time to review it and perhaps take advantage of this opportunity to further reduce your interest costs.