Happy Days! here again or not yet?



Optimism abounds!


Housing jumps again!


Consumer sentiment; Housing finance


·         The consumer sentiment index has surged out of recession territory. The index rose by 12.7 per cent – the biggest monthly surge in 22 years. The index is now at 17 month highs.

·         The number of new housing loans is at 14-month highs, lifting by 0.9 per cent in April. Loans for new construction rose by 1.3 per cent to stand at 5,641 – a seven year high.

·         First home-buyers account for over 28 per cent of home loans taken out – the highest on record. Banks account for over 92 per cent of all loans – a 33-year high. The average loan stood at $264,700, up 11.9 per cent on a year ago.

What does it all mean?

·         The sharp pick up in business confidence recorded yesterday has been mirrored in the latest consumer sentiment survey. A combination of a firmer sharemarket, super-low interest rates, a stronger Aussie dollar and most importantly, the news of Australia avoiding recession has lifted consumer spirits. For the first time in 17 months there are now more consumers who are optimistic about the future than pessimistic.

·         Consumer sentiment has remained in recession territory for over a year, however consistent with the no recession story, sentiment levels have once again reached more optimistic levels. The monthly increase in sentiment was the biggest in 22 years, as confirmation that Australia had avoided a technical recession lifted sprits considerably. It all comes back to job security and if consumers start feeling that employment prospects are holding up relatively well in the current environment, optimism will follow.

·         For most consumers the strength of the Australian dollar tends to signify the strength of the economy. The rally in the Aussie over the last few months will make overseas holidays and imports cheaper. Interestingly amongst respondents the “News Heard Index” on the Australian jumped from 32.9 in March to 135.4 in June.

·         The latest round of housing finance figures has reinforced our view that the housing sector will be the growth driver over the next year. Overall, the total number of new housing loans is at the best levels in 14 months. A sustained improvement in activity, a significant increase in loan size and importantly a substantial jump in construction of new dwellings are all encouraging signs that rate cuts and government stimulus are working their magic.

·         Government forecasts suggest domestic economic activity will remain relatively soft over the next year however we expect the pick up in housing activity will go along way to supporting growth. New construction loans have risen by a further 1.3 per cent in April following the 13.7 per cent surge in March, and are now at the highest levels in over seven years. The knock on effects to housing-related retailers can already be seen with sales of furniture, floor coverings and tiles at the best levels in over seven years.

·         Prospective home-buyers are certainly finding the current conditions quite attractive and first home-buyers are taking advantage of the government’s additional boost. Over the last six months over 87,000 properties have been purchased by first home buyers – the best result in records going back 17 years.

·         The concerted efforts by the government and the Reserve Bank to stimulate the economy are having the desired effect. Job security remains the one major concern for budding home buyers. If employment manages to hold up relatively well in coming months, demand for homes should gain significant momentum.

What do the figures show?

·         Housing finance: The number of new owner-occupier housing loans rose for the seventh straight month in April, lifting by 0.9 per cent. The number of home loans (60,395) is at 14-month highs.

·         Construction loans rose by 1.3 per cent, while the purchase of newly erected dwellings fell by 0.5 per cent. The number of new construction loans (5,641) is at seven year highs. Loans for the purchase of established dwellings rose by 0.9 per cent while refinancing rose by 0.3 per cent.

·         The value of new housing commitments (owner occupier and investment) rose by 3.6 per cent in April to $21.5 billion. Investment loans rose by 8.9 per cent while owner-occupier loans rose by 1.9 per cent.

·         First home buyers accounted for 28 per cent of all lending in April – the highest proportion on record (almost 18 years).

·         The average loan stood at $264,700, up 11.9 per cent on a year ago. The average loan by first home-buyers fell by 0.8 per cent in April to $283,400 and stands 19.5 per cent higher than a year ago.

·         Banks financed 92.3 per cent of all home loans (by value) in April – holding near 33 year highs.

·         The index of consumer sentiment rose by 8.5 points or 12.7 per cent to 100.1 in June. The sentiment index is now up 18.2 per cent on a year earlier.

·         The current conditions index rose by 2.2 per cent, while the expectations index surged by 20.7 per cent.

·         Four out of the five components of the index rose in June.

·         The estimate of family finances compared with a year ago rose by 8.1 per cent while the estimate of family finances over the next year gained by 11.1 per cent. Economic conditions over the next 12 months rose by 37 per cent while the measure of economic conditions over the next 5 years rose by 20.2 per cent

·         The measure on whether it was a good time to buy a major household item fell by 1.6 per cent.

·         Survey respondents believe that the wisest place to put any extra savings at present is in bank deposits (27.1 per cent of respondents), followed by paying off loans (23.2 per cent), real estate (16.1 per cent) and shares (12.3 per cent).

·         The measure of wether it is a good time to buy a dwelling rose by 2.5 per cent to eight year highs, while the index of whether it is a good time to buy a car rose by 8.7 per cent.

What is the importance of the economic data?

·         Housing Finance data is produced monthly by the Bureau of Statistics and shows commitments by lenders, such as banks, to provide finance for housing purposes. The lending figures relate to those looking to buy or build homes to live in as well as those seeking to buy or build homes for investment purposes. Generally people get their finance organised first, so the figures are regarded as a leading indicator on the housing market.

·         Westpac and the Melbourne Institute release the Index of Consumer Sentiment each month. Roy Morgan conducts a survey of consumer confidence. Both surveys are aggregated from responses to questions on the current and likely future state of family finances, current and likely future state of the economy and whether it is a good time to buy a major household item. Confident consumers may be more inclined to spend, especially on major items.

What are the implications for interest rates and investors?

·         The likelihood of further rate cuts is fast being eroded. A sustained improvement in housing activity and stability in global economic conditions is likely to see the Reserve Bank remain on the interest rate sidelines in the near term.

·         Investors should think long and hard about property investments. Rents are rising at double-digit rates, construction is not yet keeping pace with population (although latest signs are encouraging), interest rates are low and home prices are rising.

Source Savanth Sebastian – Economist, CommSec



Interest Rates and the Big 4!



The following article is comes from the Sydney Morning Herald. With the concentration of market power in the hands of the Big 4, it pays borrowers to use a Broker to explore non bank loan alternatives.


Nova Star has a number of loan alternatives for home and investment loans where you are treated as a “Customer” and not a “number”





HOME owners face higher interest rates as the Big Four banks try to protect their bottom lines from rising bad debts and the higher cost of borrowing. With both the ANZ and National Australia Bank warning yesterday that the recession-hit economy will see their multibillion dollar bad loan problems spread to consumers over the next 12 months, the prospect of any further Reserve Bank rate reductions being passed on in full are receding rapidly.


ANZ revealed yesterday it had made $1.4 billion this year, following NAB’s $2 billion result. Earlier the Commonwealth reported a $2 billion profit. The Westpac and St George group is due to report a figure of at least $2 billion next week, taking the Big Four’s combined latest earnings to nearly $7.5 billion.


They are on track to make net profits of around $16 billion for the full year, say analysts.

But despite the informal pact with the Federal Government following its funding guarantee scheme that borrowers would not be penalised, the results have shone a light on the increased margins enjoyed by banks – or their surplus on the interest rate they charge customers.


Bankers warn that they will continue to be unable to pass on any future Reserve Bank rate cuts in full, due to an increase in bad loans to businesses, home buyers and credit card users as the economy sours.

ANZ revealed yesterday that its first-half-year profit had dropped by more than a quarter to $1.41 billion from last March due to the worldwide recession.


The country’s fourth biggest bank took a hit of $1.4 billion against its six-month accounts to cover for bad debts and sour loans which are now beginning to affect more businesses.


However, on a different measure ANZ actually increased its earnings slightly as revenue grew partly as a result of its customers depositing more money with the bank while others, such as first-home buyers, borrowed more to capitalise on the Government’s cash grant boost to the housing sector.


It also disclosed “solid” income growth from its mortgage division, one of the areas where ANZ and its main rivals have complained of increasing cost pressures caused by their own higher borrowing.


That followed NAB’s figures on Monday that it had increased its net margins over consecutive six-month periods since March 2008 within its Australian division by raising the cost of money it lends to home owners and small businesses.


At the same, NAB’s chief executive, Cameron Clyne, said the bank’s ability to pass on any further official cuts in interest rates – which are expected to fall from 3 per cent to 2 per cent over the next few months – was limited given its cost pressures.


NAB reported a near-10 per cent fall in its half-year earnings to $2 billion, after its bad debt charge rose by $1.1 billion to $1.8 billion.


The bank’s customers have already felt the effect of its latest view on interest rates. NAB withheld all of the most recent 0.25 percentage point reduction. ANZ only passed on 0.1 percentage points as did the Commonwealth Bank and Westpac.


The ANZ chief executive, Michael Smith, told the Herald yesterday it was a question of balancing the needs of consumers with those of maintaining a strong banking sector in what was turning out to be the worst global downturn since the Great Depression of the 1930s.


“I want to cut rates as much as I possibly can,” he said. “The less strain there is on our customers the better.” Neither did he want debt to increase on anyone. “We are aligned on the same page here,” he said in response to claims that banks might be benefiting from the downturn.


Nevertheless, the banks remain under political pressure to relieve the interest rate burden on consumers with the latest cuts aimed at stifling the worst effects of a domestic recession.


“As I have said many times, Australians have a right to expect their banks to pass on rate relief as soon as

possible,” the Treasurer, Wayne Swan, said last night.


BOOSTER for FHOG. Up to $21,000 towards YOUR new Home!

Hello again.  Well hasn’t it been interesting a few weeks.  I can hardly keep up with whats going on things seem to be changing so much.  In this article I want to speak about the FHOG!!! That’s First Home Owners Grant.  I’ll give you quick guide through how to know if you qualify and when you can receive it.    BUT (and there always seems to a but),  I also want to touch on our expectations, in terms of what we need in a first home on the one hand and what we want.  

The BOOST in the first home buyers grant from $7000 to $14000 and up to a whopping $21,000K if you are building or purchasing a new home  is fantastic news for first home buyers.    Remember and this is important you must have your FHOG application submitted by 30 June 2009 to be eligible.  (this might change but that is the current position) The ‘boost’ is only for a limited time, 14 October 2008 – 30 June 2009. 

First Home Owners who applied prior to the announcement of the boost scheme are still only eligible for the original $7000, even if the contract did not settle until after the 14th October.  The FHOG is administered by the Office of State Revenue (OSR) and already there are reports of people cancelling contracts entered into prior to the 14th October and then entering into a new contract for the same property so that they can take advantage of the new Boost scheme.  Please be warned that the OSR is investigating these cases and you are not eligible for the extra grant.   As always it seems terribly unfair but there has to be a start and finish.  

To know if you are eligible. 

§  You are at least 18 years of age

§  You are buying or building your first home

§  You, or a joint applicant, are an Australian citizen or a permanent resident

§  You and your spouse have not previously owned an interest in land inAustralia that had a residence on it prior to 1 July 2000 (This includes investment homes)

§  You and your spouse have not previously owned an interest in land in Australia that had a residence on or after 1 July 2000 in which you or your spouse has resided

§  You are married or have been living in a de facto relationship for more than two years, and neither you nor your spouse can have owned a home, individually or with any other person.

§  All owners of the home must be an applicant on the Grant application.

§  Neither the applicant nor the applicant’s spouse are entitled to the Grant if either have received an earlier grant.


And at the  risk of repeating myself

There is only one FHOG per application So if both of you have never owned a house before then you are eligible to claim the grant once.  You do not both get the grant,  that is $21000 x 2.   

If one of you has owned a house before then you CANNOT claim the First Home Owners Grant.

 Now that you have satisfied all the requirements factor in the following.

All current economic forecasts are for significant job losses across the board over the next 12 – 18 months.  So, if you qualify for a First Home Buyer Grant It will be very tempting for you to want to get as much  house as you can. 



Think about other things before committing every available piece of spare income you have. 

Interest rates may rise again

Unforeseen illness

Unforeseen job loss


You only need one of these to happen to put you into mortgage stress.  And as I have written about previously, when you have to start refinancing because you can’t make your mortgage payments, statistics indicate that its only about 20 months before you either have to sell or the bank forecloses on your home.

Also don’t lose sight of the fact that you MUST live in the house for the first 12 months.   If you do not then you must repay your grant to the Office of State Revenue.  There are no extenuating circumstances.   Losing your job and having to move interstate within the first 12 months to get employment means you will have to pay back the grant.


And finally IF you are well on your way to saving for a deposit anyway then you really should try and take advantage of it but remember your first home doesn’t have to be your dream home!!

It takes time to build your dream.  The house I live in today is a far cry from my first home.  Its not that I didn’t want everything, I simply couldn’t afford it and if your friends are going to judge you by the number of bathrooms or the sort of furniture you have ask yourself if they are really your friends. 

I’m only too happy to answer any questions you may have just drop me an email Julie@novastarfinance.com.au. 

Until next time Julie




So! How’s your credit rating?



The face of the world is changing.    The world is a different place from 12 months ago, and it is certainly not the same as it was even a few weeks ago.   These are new and very uncertain times and the latest developments in the local financial markets are sparking many questions from people as Australia continues to come to terms with the widening global credit crunch. 

In my last article I mentioned how it is going to become increasingly difficult to borrow money over the next 18 months to 2 years.  Even in Australia, the credit market has tightened up significantly.  

Your credit report is the first thing any lender, be they bank or non-bank, will scrutinize before deciding to even accept your application.    This is such an important part of your future borrowing capacity.

There are also many things that are looked at and taken into account in your credit report.

A credit file is updated every time a person applies for new credit. This happens whenever you sign a privacy statement.

The information contained in the file is easy to read.

Importantly, the information is one of the factors that impacts on your credit-worthiness.

Banks, retailers and credit providers use the data, along with the information you provide to them, to determine whether to lend you money or not.  If you are credit worthy.


The following steps are recommended:

·      Pay your bills on time

·      Call your credit provider(s) in a timely manner and alert them if there is a problem meeting your commitments

·      Review your credit file to make sure there are no errors in the information and/or discover any overdue accounts that have been forgotten about.

·      Monitor your credit file to ensure someone is not fraudulently using your identity (a growing problem worldwide)

·      A “no” to a credit application, or the supply of goods and services where payment is deferred, does not necessarily mean your credit file is flawed. Credit providers each have their own lending criteria, so seek an explanation

·      Remember that the details of overdue accounts listed as a payment default, even when paid; remain on your file for five years from the date of listing, as part of your credit history. 

·      Overdue accounts listed as a clearout remain on your file for seven years from the date of listing

You can request your own credit file.  It is a free service that allows you access to your personal credit file; to which everyone is entitled.   It is worth noting that if you are a director of a company, the directorship will show on your personal credit file and the lender will automatically do a credit search on that company file.


The sorts of things you find on your credit report are:

Personal details such as: name, residential addresses, date of birth, drivers licence number and current or previous employer

·      Records of some current credit accounts

·      Overdue Accounts (Defaults) which may have been listed against your name

·      Bankruptcy Act Information

·      Court Judgements and Writs & Summons

·      Public record information such as Directorships and Proprietorships.

Your credit report contains personal information about you as well as information that would be relevant for the type of loan you are applying for.  The sorts of things that would trigger an enquiry on your credit report would be:

Purchasing a mobile phone

Instore credit cards

Interest free finance

Purchase of house or land

Application for a vehicle loan

Plus many more

Remember, even if you don’t go ahead with the purchase the enquiry remains on your report.  

Be aware of this and do not go around signing privacy statements, without first considering the impact it might have in the future.  People are often declined credit because there are too many enquiries on their credit report.

The most important thing of all is

No credit provider is allowed to access a consumer credit file without the permission of the applicable individual. 

You are able to access your own credit file as often as you like without it appearing as an enquiry.

In the next article I plan to touch on the new First Home Owners Grant which has been boosted to help first home buyers and also stimulate construction. As always, if there is anything you would like me to touch on, please drop me an email.


Until next time.



First Home Owners Guide

The process of purchasing your first home is certainly a challenging one. It can be broken down in to the following 5 steps.

  • Planning
  • Arranging
  • Selecting
  • Buying
  • Settling


Most banks and lenders will need to see your savings history for the last 6 months to show that you can make the repayments.

Look around at the sort of houses you want and then look around at the sort of houses you can afford. Find out what the monthly repayment amount will be. When you know what that is, lets say $500 per week. Continue Reading »


For the Property Investor – Advance your interest

Lets deal with the second first. Very simply it means that you prepay 12 months of interest on your loan in advance. So towards the end of the financial year, for example BEFORE the 30th June 2008 you will pay 12 months of interest in advance, taking you to the 30 June 2009. So you have pre-paid next years interest and can now claim it as a deduction the current financial year. So in July, investors who are eligible to do so can get back some of that interest back in the form of a tax deduction.

You can’t just do this with any loan you have, when the loan is negotiated or applied for, you need to ask your broker for an ‘interest in advance loan’.

An interest in advance loan is similar to ‘fixed rate, interest only standard residential home loan’ EXCEPT you pay the interest in advance. Continue Reading »


Second Mortgage Industry in Australia

These are tough times if you need a loan but don’t have sufficient or unencumbered property to offer as a collateral to the Bank or other financial institution.

Cash is King and if you need more liquidity fast but your first mortgage lender will not advance any more or cannot act quickly, you might be in unforeseen trouble.

A Second mortgage might be the best possible option at this difficult time. Continue Reading »



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