Interest Rates on Hold

Wednesday, 03 February 2010

At its meeting today, the Reserve Bank Board decided to leave the cash rate unchanged at 3.75 per cent.

Govenor Glenn Stevens stated “The global economy is growing, and world GDP is expected to rise at close to trend pace in 2010 and 2011. The expansion is still likely to be modest in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity. In Asia, where financial sectors are not impaired, recovery has been much quicker to date, though the Chinese authorities are now seeking to reduce the degree of stimulus to their economy. Global financial markets are functioning much better than they were a year ago. Credit conditions nonetheless remain difficult in the major countries as banks continue to face loan losses associated with the period of economic weakness. Concerns regarding some sovereigns have increased.

In Australia, economic conditions have been stronger than expected, after a mild downturn a year ago. The effects of the fiscal stimulus on consumer demand have now faded, but household finances are being supported by strong labour market outcomes and a recovery in net worth. Public infrastructure spending is now boosting demand, as is an upturn in housing construction. Investment in the resources sector is strong. The rate of unemployment appears to have peaked at a much lower level than earlier expected.

Inflation has, as expected, declined in underlying terms from its peak in 2008, helped by the fall in commodity prices at the end of 2008, a noticeable slowing in private sector labour costs during 2009, the recent rise in the exchange rate and a period of slower growth in demand. CPI inflation has risen somewhat recently as temporary factors that had been holding it down are now abating. Inflation is expected to be consistent with the target in 2010.

Credit for housing has been expanding at a solid pace, and dwelling prices have risen significantly over the past year. Business credit, in contrast, has continued to fall, as companies have sought to reduce leverage, and lenders have imposed tighter lending standards and in some cases sought to scale back their balance sheets. The decline in credit has been concentrated among large firms, which generally have had good access to equity capital and, more recently, to debt markets; credit conditions remain difficult for many smaller businesses.

With the risk of serious economic contraction in Australia having passed, the Board had moved at recent meetings to lessen the degree of monetary stimulus that was put in place when the outlook appeared to be much weaker. Lenders have generally raised rates a little more than the cash rate over recent months and most loan rates have risen by close to a percentage point. Since information about the early impact of those changes is still limited, the Board judged it appropriate to hold a steady setting of monetary policy for the time being.

Interest rates to most borrowers nonetheless remain lower than average. If economic conditions evolve broadly as expected, the Board considers it likely that monetary policy will, over time, need to be adjusted further in order to ensure that inflation remains consistent with the target over the medium term.”

Million Dollar Homes

Wednesday, 03 February 2010

The Real Estate Institute of Victoria recently predicted that the median house price would be $1 million dollars in Victoria in ten years time. You may think that sounds extreme, but a quick breakdown shows otherwise.

Let’s first take a look at what has happened to the median house prices over the past 10 years. Using information from Residex.com.au we can estimate the median house price in 1999 for the following cities:

• Sydney: $315,000
• Melbourne: $199,000
• Brisbane: $150,000

In 2009, Residex valued the median house prices of the same cities:

• Sydney: $615,000
• Melbourne: $519,00
• Brisbane: $459,000

Over this ten year period house prices almost doubled in Sydney, and easily more than doubled in Melbourne and Brisbane. If house prices continue to increase at a similar rate over the next 10 years, all these cities will have a median house price of over $1 million dollars.

Flinders Institute of Housing, Urban and Regional Research professor Joe Flood recently said that ‘the writing is on the wall for the Australian dream. The country that promised limitless land, cheap housing and near universal home ownership to all comers now has the most expensive housing in the world.’

While house prices fell sharply in the US and declined in Europe as the Global Financial Crisis took hold, the same has not happened here. The Australian government’s recent removal of the first home owners boost and the Reserve Bank of Australia rising interest rates may momentarily halt rising house prices. In the long term however, Australia’s strong population growth and widely rumoured housing shortage will ensure owning your own home becomes increasingly more expensive.

If you are thinking of getting into the housing market it may be better to do it sooner rather than later. Whenever you do decide to buy, your credit union will be there to help. Our website has a lot of information on purchasing property, and our staff members have a wealth of experience in helping people to find the best home loan.

Buy Now Before House Prices Rise

Thursday, 21 January 2010

“House prices may surge about 20 per cent or more in some of Australia's largest cities over the next three years, driven higher by on-going shortages.” As the economy recovers we are likely to see an expected rebound in interest rates. Although the Reserve Bank officially lifted the interest rate to 3.25 per cent and signaled more rises to follow, “the outlook for the Australian housing market looks positive,” said QBE LMI chief Ian Graham.

Adelaide is forecasted to lead the advances likely to be “23% higher in June 2012,” according to the QBE LMI Housing Outlook.  Sydney is likely to follow with a housing price rise of 21% in the same period, while Melbourne prices “may be 19 per cent higher.”

“Prices in the Australian housing market have been driven up by a chronic shortage of homes, estimated be about 56,600 in 2009. The projected price increases will add to a huge run-up over the past decade.”
Based on the Real Estate Report, it has been stated that the median house price in Melbourne has risen 116% in the last 10 year period. “Brisbane housing prices have increased 202 per cent while Adelaide’s increased 208 per cent during the same 10-year stretch.”

“In 2008, home prices eased about 3 per cent nationwide, bucking the trend of price drops of nearly 20 per cent in the US, UK, Ireland and Spain.”

Drivers

“The shortages have been driven by a variety of factors including population growth, tax advantages favouring home ownership and real estate investment, and price speculation by home buyers and investors. Also, bottlenecks in the approval process for home building have been blamed.”

The First Home Owners Grant has also been driving prices upward recently and won’t be phased out until the end of next year.

Rising debt

“The current household debt to income ratio is around 155 per cent; up from about 130 per cent at the time of the last RBA rate rising cycle in 2003, Westpac said today, in releasing the September consumer confidence number.”

The current rising home prices have been a major contributor to the level of debt in general households.
“According to Morgan Stanley's Gerard Minack, the ratio of average house prices to average income in Australia is now just under 5 compared with around 3.5 times at the top of the US housing cycle.”

*Data as at 14th October 2009.

Source: CHRIS ZAPPONE, SMH.

Barriers to Saving

Thursday, 21 January 2010

Doesn’t matter what time of year it is, it’s always difficult to save. The hardest part is actually finding the money to put aside once bills, loans and everyday general expenses have been taken care of. What we must do is identify the main barriers to saving and take steps to avoid them.

Here at the credit union we have thought of a few ways to help you save.

Consolidate your debt

Whether it is a university debt, a mortgage debt, car loan or credit card balance; a large portion of us will have to deal with debt at some point in our lives. We offer a wide variety of services to help you consolidate your debt into one easy repayment. Our personal loan will assist you to manage repayments; while our financial planner will provide you with important financial advice.

Prepare for unexpected events

You never know what's around the corner. If an unexpected event occurs such as a car accident, unemployment or high medical bills, it is important to know that you have savings to tide you over should the worst occur.

In addition to insurance, regular deposits are the key! Open one of our high interest savings accounts and establish a regular direct debit amount that you can afford. You should aim for 10% of your income as a minimum, however even smaller amounts add up! It is an effective way to put funds aside and helps elimiate some of the stress associated with these events.

Know where your money goes

Often our capacity to save is limited not only by our income but by the fact that we’ve made no firm plans to save. As we get older our income increases but if we’re not in control of our finances and don’t have a savings plan, our spending increases in line with our income and we end up with nothing to show for our hard work. Saving gets you where you want to go, and helps you reach your goals, whatever they may be.

In order to save effectively you need to understand where all your money is coming from and where it is going. Try keeping a spending diary for one pay period, then take a good look. Can you increase your income or cut your spending to increase the amount you set aside for savings?

Set financial goals

Any successful savings plan needs to have a series of goals, not only to give you an idea of how much to save each pay, but also to help you stay focused on the end result. When setting your goals make sure they’re real. If they’re out of control or too wild you’ll find that you won't stick to your savings plan, because you know you'll never get there.

Make sure your goals are ‘SMART’

• Specific – What are you going to do, why you are going to do it and how?
• Measurable – If you can’t measure it, you can’t manage it.
• Achievable – If you set goals which are too far out of reach, you probably won't really commit to them.
• Realistic - Devise a plan or a way of getting there which makes the goal achievable. The goal needs to be realistic for you and where you are at the moment.
• Timed - Set a timeframe for the goal: for next week, in three months, in one year. Putting an end point on your goal gives you a clear target to work towards.

Separate needs from wants

Needs are the things you must have to live, like food, clothing, and shelter. Wants on the other hand are luxury items - you can live without them, but having them will improve the quality and enjoyment of your life (designer label clothes, eating out, music, CDs, DVDs, new car etc). Try creating your own personal checklist. Divide your list into columns – in column one list things you really need and in column two list all your wants. Once you’ve crossed off all of your needs, then you can start saving for your wants.

Create a realistic budget

Once you’ve understood where your money’s coming from and where it’s going, have established some ‘smart’ financial goals and distinguished your needs from your wants, you’ll be well on the way to creating a realistic budget.

A budget is a detailed plan of all the income you expect to receive and all the money you intend to spend over a certain period of time. A good idea is to make your budget coincide with your pay. For example, if you get paid weekly, make your budget weekly too.

Revisit your budget every three months to see if there are any changes, e.g. pay increases you can transfer to your savings or spending you can tighten up on.

Deposit your savings

It pays to have your regular savings deposited into a savings account and not under your mattress.

As the balance in your savings account grows, you should consider moving your money to one of our fixed term deposit accounts. Fixed term deposit accounts pay higher interest and stops you from getting at your money too easily.

Motivation & Determination

• Once you get your head around the idea of saving, it's not as hard as it sounds. All you need is the motivation to start and the determination to stick with it.
• Think years, not weeks or months. Keep focused on the things you’ll be able to afford if you save.
• Prepare a budget and review it regularly.
• Put a fixed percentage of your pay (think 10% as a minimum) away each pay.
• Put your money out of reach, somewhere you can't get your hands on it easily.

eNews Competition Winner

Tuesday, 29 September 2009

Congratulations to Gregory Marshall, the winner of our recent eNews Registration Competition! You might have seen the Register for eNews Competition featured in our July 2009 Member Newsletter...

Best Standard Variable Rate Mortgage - Sunday Telegraph

Monday, 20 July 2009

In a recent article in the Sunday Telegraph, we were shown as offering the best standard variable rate mortgage available from any mutual.

Welcome to our NEW website!

Monday, 06 July 2009

Our Promise to You

Tuesday, 14 July 2009

We have joined with 126 other credit unions and building societies in Australia to launch the Mutual Banking Code of practice.