The tax advantages under the Government's new superannuation laws are encouraging some property investors to sell-up and boost their super.
But this strategy is only likely to benefit a small section of the market.
Housing Industry Association (HIA) chief economist Simon Tennent said he believes the super changes, which come into effect on July 1, have triggered an exit from the property market, particularly for disappointed investors or those nearing retirement.
Under the Federal Government's new super regulations, money received from a taxed super fund will be tax-free for people over the age of 60, making it the most tax-effective investment for retirement.
At present, money is taxed when put into the fund, while within the fund, and generally when withdrawn.
Once the new laws are in place, an individual will be limited to investments totalling $150,000 a year or a maximum $450,000 within a three-year period.
However, at present the Government is allowing deposits of up to $1 million to be put into super before the June 30, 2007, cut-off date.
This transitional phase has opened a window of opportunity for some investors to boost their retirement savings by selling other investments, such as property.
Mr Tennent said some investors had become disheartened with the property market due to recent low house price growth, which he did not see picking up for at least 12 to 18 months.
"I don't think prices will keep accelerating because we've hit an affordability threshold,'' he said.
"And as this coincides with changes to superannuation, our view is that there will be a flow of funds out of property.''
However, ANZ financial planner Ron Holmes said there were a lot of issues to consider before deciding to move property investments into super.
"It is a complex area; There's so many possible 'maybes' and 'what-ifs', and everybody's circumstances are so different,'' he said.
Mr Holmes said the investor's age, if they were retired or when they were planning to retire, and whether they were married, all played a role in determining if this strategy would be beneficial.
Other important considerations were house price appreciation, how much capital gains tax investors would pay when selling their property, and how much they were saving in investment property tax deductions, he said.
Mr Holmes said this strategy would probably only benefit a very narrow part of the market, including those who were nearing retirement and were planning to sell properties valued at about $1 million if they were single or $2 million if they were married.
He said many of those approaching retirement, but with a lower value investment property, could sell their property at anytime after the June 30 cut-off date and still invest the money in super.
"If they're a married couple, and they've got a $900,000 property and they sell it, they can still put $450,000 each into their super after June 30,'' he said.
Mr Holmes said waiting until retirement to sell investment property could also have benefits, with retirees paying less capital gains tax on their properties due to their lower income, Mr Holmes said.
He said younger investors needed to be wary that moving property investments into super would restrict their access to that money, while they would also lose their tax offsets.
"I can't see it as being a very attractive strategy if currently it's providing you with tax offsets and the property is growing,'' he said.
However, he said that before making any decisions, investors should closely examine their individual situation.
"Go along and talk to your licensed tax adviser and your licensed financial planner before you do a thing,'' he said.
source: AAP
Sunday, January 28, 2007
National Australia Bank reduces its long term fixed home loan rates
The National Australia Bank yesterday slashed interest rates on its suite of long-term fixed mortgage products despite rising funding costs in the wholesale money market.
The bank has cut the rate on its 10-year fixed home loan by 0.5 per cent to 6.95 per cent.
NAB has also cut rates on both its four-year and five-year fixed mortgages by 0.1 per cent to 7.25 per cent.
NAB's aggressive pitch for long term business in the home loan market follows similar moves last month by Westpac which cut its five-year fixed rate by 0.2 per cent to 7.39 per cent.
The major banks are angling to lock in borrowers for the long haul as public concern over official rate rises intensifies.
Heightened competition in the long term mortgage market is occurring despite significant rises in wholesale funding markets.
This means that the banks are prepared to absorb lower profit margins to acquire more borrowers.
The indicator rate on 10-year Commonwealth bonds has risen 0.3 per cent to 5.92 per cent since November 24, while five-year indicator rates have risen by the same amount in the bank swap market.
NAB's pricing moves in the long term mortgage market came as other lenders warned that the Reserve Bank was likely to move on official rates next month.
Wizard Home Loans founder and chairman Mark Bouris says an interest rise is inevitable next month while ANZ chief executive John McFarlane thinks it's a 50-50 proposition.
Mr Bouris is tipping a quarter of a percentage point rise, adding that it will cause hardship for new mortgagees.
"I think the Reserve Bank, if the numbers come in, if the underlying inflation comes in at what the expectations are, the Reserve Bank will make a move," Mr Bouris said.
"It's going to be tough, I'm sure it will be, but that's only a very small proportion of the mortgage environment . . . of the $600 billion (worth of mortgages) that might be about three per cent and not every one of those is going to be affected," he said.
He said a February rise would be the last for the year and would achieve the RBA's aims.
"You know the whole thing's designed to stop people from spending. That's what monetary policy's about. And I think it will do that," he said.
But Mr McFarlane said there was no compelling reason to lift rates.
"Analysts and economists are mixed on this, but my own sense is that it's not particularly compelling, not urgent," Mr McFarlane said.
"Obviously the Reserve Bank will act in the event if inflation is systematically outside its target range - which it has not been."
Source: AAP
The bank has cut the rate on its 10-year fixed home loan by 0.5 per cent to 6.95 per cent.
NAB has also cut rates on both its four-year and five-year fixed mortgages by 0.1 per cent to 7.25 per cent.
NAB's aggressive pitch for long term business in the home loan market follows similar moves last month by Westpac which cut its five-year fixed rate by 0.2 per cent to 7.39 per cent.
The major banks are angling to lock in borrowers for the long haul as public concern over official rate rises intensifies.
Heightened competition in the long term mortgage market is occurring despite significant rises in wholesale funding markets.
This means that the banks are prepared to absorb lower profit margins to acquire more borrowers.
The indicator rate on 10-year Commonwealth bonds has risen 0.3 per cent to 5.92 per cent since November 24, while five-year indicator rates have risen by the same amount in the bank swap market.
NAB's pricing moves in the long term mortgage market came as other lenders warned that the Reserve Bank was likely to move on official rates next month.
Wizard Home Loans founder and chairman Mark Bouris says an interest rise is inevitable next month while ANZ chief executive John McFarlane thinks it's a 50-50 proposition.
Mr Bouris is tipping a quarter of a percentage point rise, adding that it will cause hardship for new mortgagees.
"I think the Reserve Bank, if the numbers come in, if the underlying inflation comes in at what the expectations are, the Reserve Bank will make a move," Mr Bouris said.
"It's going to be tough, I'm sure it will be, but that's only a very small proportion of the mortgage environment . . . of the $600 billion (worth of mortgages) that might be about three per cent and not every one of those is going to be affected," he said.
He said a February rise would be the last for the year and would achieve the RBA's aims.
"You know the whole thing's designed to stop people from spending. That's what monetary policy's about. And I think it will do that," he said.
But Mr McFarlane said there was no compelling reason to lift rates.
"Analysts and economists are mixed on this, but my own sense is that it's not particularly compelling, not urgent," Mr McFarlane said.
"Obviously the Reserve Bank will act in the event if inflation is systematically outside its target range - which it has not been."
Source: AAP
Thursday, January 25, 2007
Mortgage brokers try to pick banks interest rate trend after mixed signals amid asset quality decline concerns
Mortgage brokers are scratching their trying to pick the way interst rates will pan out after receiving mixed signals from the Major banks mortgage interest rate decisons, depending whether the home loans are fixed interest or variable rate products.
The nation's biggest bank, the Commonwealth Bank, on Tuesday raised its one- and three-year fixed rates by 11 basis points to 7.35 per cent.
National Australia Bank yesterday lifted its introductory one-year fixed rate for the second time since December - up 9 basis points to 6.74 per cent. However, it left its three-year fixed rate unchanged at 7.18 per cent - the cheapest rate of the majors.
Westpac and ANZ increased their three-year fixed rates by 16 basis points to 7.35 per cent in December.
Cannex financial analyst Harry Senlitonga said that in "general the trend is moving up a bit" for three-year fixed rates. He said this was an indication the banks believed rates were on the way up.
He said three-year fixed rates had increased between 5 to 10 basis points.
Mr Senlitonga said that another factor that could be contributing to the higher fixed rates was demand.
"(For) a product which has a strong demand, they will price it higher," he said.
Major banks said last year that most of their customers were switching from variable to fixed rates.
A CBA spokesman said "fixed rates are not tied to any Reserve Bank movement, they fluctuate regularly in line with movements in the cash market".
He also said CBA was "competitive with all of the other banks" and that all of its fixed rate offerings were "competitive".
Since December, the money market three-year fixed rate has increased from 6.54 per cent to 6.68 per cent.
Going against the trend was St George Bank, which this week dropped its three-year fixed rate from 7.19 per cent to 6.95 per cent.
Credit ratings agency Fitch Ratings said it expected growth in the Australian banking sector to moderate in 2007 due to competition and slower growth in housing finance.
In a report released yesterday, Fitch said it also believed asset quality would come under pressure.
"For a number of years, asset quality at the Australian banks has been near pristine; this is clearly unsustainable in the medium term," said Fitch associate director Tim Roche.
Of bigger concern was the explosion of leveraged buyout activity by private equity firms in the Australian corporate sector and higher gearing levels.
"If this were to coincide with weaker economic conditions it may lead to an increase in unemployment which is likely to have a negative impact on bank asset quality," Mr Roche said.
Source: AAP
The nation's biggest bank, the Commonwealth Bank, on Tuesday raised its one- and three-year fixed rates by 11 basis points to 7.35 per cent.
National Australia Bank yesterday lifted its introductory one-year fixed rate for the second time since December - up 9 basis points to 6.74 per cent. However, it left its three-year fixed rate unchanged at 7.18 per cent - the cheapest rate of the majors.
Westpac and ANZ increased their three-year fixed rates by 16 basis points to 7.35 per cent in December.
Cannex financial analyst Harry Senlitonga said that in "general the trend is moving up a bit" for three-year fixed rates. He said this was an indication the banks believed rates were on the way up.
He said three-year fixed rates had increased between 5 to 10 basis points.
Mr Senlitonga said that another factor that could be contributing to the higher fixed rates was demand.
"(For) a product which has a strong demand, they will price it higher," he said.
Major banks said last year that most of their customers were switching from variable to fixed rates.
A CBA spokesman said "fixed rates are not tied to any Reserve Bank movement, they fluctuate regularly in line with movements in the cash market".
He also said CBA was "competitive with all of the other banks" and that all of its fixed rate offerings were "competitive".
Since December, the money market three-year fixed rate has increased from 6.54 per cent to 6.68 per cent.
Going against the trend was St George Bank, which this week dropped its three-year fixed rate from 7.19 per cent to 6.95 per cent.
Credit ratings agency Fitch Ratings said it expected growth in the Australian banking sector to moderate in 2007 due to competition and slower growth in housing finance.
In a report released yesterday, Fitch said it also believed asset quality would come under pressure.
"For a number of years, asset quality at the Australian banks has been near pristine; this is clearly unsustainable in the medium term," said Fitch associate director Tim Roche.
Of bigger concern was the explosion of leveraged buyout activity by private equity firms in the Australian corporate sector and higher gearing levels.
"If this were to coincide with weaker economic conditions it may lead to an increase in unemployment which is likely to have a negative impact on bank asset quality," Mr Roche said.
Source: AAP
Australia's big four banks raise fixed interest mortgage rates
Australia's four biggest banks have given their strongest indication that they anticipate interest rates will rise over the long term by increasing their fixed interest mortgage rates.
The nation's biggest bank, the Commonwealth Bank, on Tuesday raised its one- and three-year fixed rates by 11 basis points to 7.35 per cent.
National Australia Bank yesterday lifted its introductory one-year fixed rate for the second time since December - up 9 basis points to 6.74 per cent. However, it left its three-year fixed rate unchanged at 7.18 per cent - the cheapest rate of the majors.
Westpac and ANZ increased their three-year fixed rates by 16 basis points to 7.35 per cent in December.
Cannex financial analyst Harry Senlitonga said that in "general the trend is moving up a bit" for three-year fixed rates. He said this was an indication the banks believed rates were on the way up.
He said three-year fixed rates had increased between 5 to 10 basis points.
Mr Senlitonga said that another factor that could be contributing to the higher fixed rates was demand.
"(For) a product which has a strong demand, they will price it higher," he said.
Major banks said last year that most of their customers were switching from variable to fixed rates.
A CBA spokesman said "fixed rates are not tied to any Reserve Bank movement, they fluctuate regularly in line with movements in the cash market".
He also said CBA was "competitive with all of the other banks" and that all of its fixed rate offerings were "competitive".
Since December, the money market three-year fixed rate has increased from 6.54 per cent to 6.68 per cent.
Going against the trend was St George Bank, which this week dropped its three-year fixed rate from 7.19 per cent to 6.95 per cent.
Credit ratings agency Fitch Ratings said it expected growth in the Australian banking sector to moderate in 2007 due to competition and slower growth in housing finance.
In a report released yesterday, Fitch said it also believed asset quality would come under pressure.
"For a number of years, asset quality at the Australian banks has been near pristine; this is clearly unsustainable in the medium term," said Fitch associate director Tim Roche.
Of bigger concern was the explosion of leveraged buyout activity by private equity firms in the Australian corporate sector and higher gearing levels.
"If this were to coincide with weaker economic conditions it may lead to an increase in unemployment which is likely to have a negative impact on bank asset quality," Mr Roche said.
Source: Newscorp
The nation's biggest bank, the Commonwealth Bank, on Tuesday raised its one- and three-year fixed rates by 11 basis points to 7.35 per cent.
National Australia Bank yesterday lifted its introductory one-year fixed rate for the second time since December - up 9 basis points to 6.74 per cent. However, it left its three-year fixed rate unchanged at 7.18 per cent - the cheapest rate of the majors.
Westpac and ANZ increased their three-year fixed rates by 16 basis points to 7.35 per cent in December.
Cannex financial analyst Harry Senlitonga said that in "general the trend is moving up a bit" for three-year fixed rates. He said this was an indication the banks believed rates were on the way up.
He said three-year fixed rates had increased between 5 to 10 basis points.
Mr Senlitonga said that another factor that could be contributing to the higher fixed rates was demand.
"(For) a product which has a strong demand, they will price it higher," he said.
Major banks said last year that most of their customers were switching from variable to fixed rates.
A CBA spokesman said "fixed rates are not tied to any Reserve Bank movement, they fluctuate regularly in line with movements in the cash market".
He also said CBA was "competitive with all of the other banks" and that all of its fixed rate offerings were "competitive".
Since December, the money market three-year fixed rate has increased from 6.54 per cent to 6.68 per cent.
Going against the trend was St George Bank, which this week dropped its three-year fixed rate from 7.19 per cent to 6.95 per cent.
Credit ratings agency Fitch Ratings said it expected growth in the Australian banking sector to moderate in 2007 due to competition and slower growth in housing finance.
In a report released yesterday, Fitch said it also believed asset quality would come under pressure.
"For a number of years, asset quality at the Australian banks has been near pristine; this is clearly unsustainable in the medium term," said Fitch associate director Tim Roche.
Of bigger concern was the explosion of leveraged buyout activity by private equity firms in the Australian corporate sector and higher gearing levels.
"If this were to coincide with weaker economic conditions it may lead to an increase in unemployment which is likely to have a negative impact on bank asset quality," Mr Roche said.
Source: Newscorp
Australia's credit card shoppers don't read the fine print
Credit card shoppers need to boost their awareness of fees and interest rate charges on their credit cards, according to a report and survey conducted by leading bank Citibank.
Almost half of all respondents (48 per cent) to a recent survey were ignorant of the interest rate on their credit card, according to the research by banking group Citibank.
And almost one-third (31 per cent) were unsure how many interest free days they were entitled to after making a purchase.
Citibank's card marketing chief, Madeline O'Connor, said it was important consumers took care.
"We want to encourage people to know the basics on their credit card, after all it's something that is used regularly by many of us," Ms O'Connor said.
The research also found almost one quarter of respondents (23 per cent) were unsure if the interest rate that applied to credit card purchases also applied to cash advances.
A majority also thought women were more likely than men to make impulse credit card purchases, but the items they bought were more practical.
Citibank surveyed 972 people for the study, nationwide.
Source: AAP
Almost half of all respondents (48 per cent) to a recent survey were ignorant of the interest rate on their credit card, according to the research by banking group Citibank.
And almost one-third (31 per cent) were unsure how many interest free days they were entitled to after making a purchase.
Citibank's card marketing chief, Madeline O'Connor, said it was important consumers took care.
"We want to encourage people to know the basics on their credit card, after all it's something that is used regularly by many of us," Ms O'Connor said.
The research also found almost one quarter of respondents (23 per cent) were unsure if the interest rate that applied to credit card purchases also applied to cash advances.
A majority also thought women were more likely than men to make impulse credit card purchases, but the items they bought were more practical.
Citibank surveyed 972 people for the study, nationwide.
Source: AAP
Home loan and personal lending dips as last year's rate rise
Total personal finance commitments fell 1.2 per cent in November, seasonally adjusted, to $6.621 billion compared to $6.702 billion in October, the Australian Bureau of Statistics said.
Total commercial finance, seasonally adjusted, fell 11.8 per cent in November to $33.319 billion from an upwardly revised $37.77 billion in October, the ABS said today.
The value of commitments for purchases of dwellings by individuals for rent or resale fell 1.4 per cent, seasonally adjusted.
Lease finance rose 0.2 per cent in November to $519 million compared with an upwardly revised $518 million in October.
Housing finance for owner occupation slipped 0.9 per cent to $13.631 billion from an upwardly revised $13.750 billion in October.
Source: AAP
Total commercial finance, seasonally adjusted, fell 11.8 per cent in November to $33.319 billion from an upwardly revised $37.77 billion in October, the ABS said today.
The value of commitments for purchases of dwellings by individuals for rent or resale fell 1.4 per cent, seasonally adjusted.
Lease finance rose 0.2 per cent in November to $519 million compared with an upwardly revised $518 million in October.
Housing finance for owner occupation slipped 0.9 per cent to $13.631 billion from an upwardly revised $13.750 billion in October.
Source: AAP
Credit cards and personal loans on low incomes the biggest cause of Australia's bankruptcies
Excessive debt run up on easy credit is causing concern.
The number of people declared bankrupt or entering into agreements with creditors jumped 16.4 per cent last year, with higher interest rates and excessive debt to blame.
The Inspector-General in Bankruptcy, Peter Lowe, yesterday said the number of people getting into trouble with their creditors had been rising since 2002-03. "There has been a resurgence of bankruptcy activity. It is not astronomical but it is happening," he said.
During 2006, 23,840 people went bankrupt while a further 5800 entered formal agreements with their creditors.
The number of bankruptcies peaked at 26,320 in 1998-09, but there were fewer debt agreements then. Creditors increasingly sought a formal arrangement, rather than accepting a default.
Mr Lowe said 18 per cent of bankruptcies were related to businesses, with most of the people involved blaming trading conditions.
The overwhelming bulk of bankruptcies were individuals who had either suffered a loss of income because of unemployment, or had taken on excessive debt.
"A lot of the activity relates to people with low incomes and relatively small unsecured debt," Mr Lowe said.
More than two-thirds had earned an income of less than $30,000 in the previous 12 months.
Credit cards were the biggest problem, accounting for 37 per cent of the outstanding debt, while personal loans accounted for 21 per cent.
Store cards and car finance each accounted for 13 per cent.
The number of bankruptcies associated with people running their own businesses had increased in line with the number of consumer debt defaults.
Although the numbers were rising, Mr Lowe stressed that it remained a tiny proportion, at just 0.14 per cent of the population.
The number of people declared bankrupt or entering into agreements with creditors jumped 16.4 per cent last year, with higher interest rates and excessive debt to blame.
The Inspector-General in Bankruptcy, Peter Lowe, yesterday said the number of people getting into trouble with their creditors had been rising since 2002-03. "There has been a resurgence of bankruptcy activity. It is not astronomical but it is happening," he said.
During 2006, 23,840 people went bankrupt while a further 5800 entered formal agreements with their creditors.
The number of bankruptcies peaked at 26,320 in 1998-09, but there were fewer debt agreements then. Creditors increasingly sought a formal arrangement, rather than accepting a default.
Mr Lowe said 18 per cent of bankruptcies were related to businesses, with most of the people involved blaming trading conditions.
The overwhelming bulk of bankruptcies were individuals who had either suffered a loss of income because of unemployment, or had taken on excessive debt.
"A lot of the activity relates to people with low incomes and relatively small unsecured debt," Mr Lowe said.
More than two-thirds had earned an income of less than $30,000 in the previous 12 months.
Credit cards were the biggest problem, accounting for 37 per cent of the outstanding debt, while personal loans accounted for 21 per cent.
Store cards and car finance each accounted for 13 per cent.
The number of bankruptcies associated with people running their own businesses had increased in line with the number of consumer debt defaults.
Although the numbers were rising, Mr Lowe stressed that it remained a tiny proportion, at just 0.14 per cent of the population.
Subscribe to:
Posts (Atom)