Welcome to 2022 and not so welcome to Omicron! So that was January, and it seems to have gone by in the blink of an eye.
In this newsletter we are going to talk about:
General thoughts – we have plenty of those. ????
Summary of January blogs
Hot tip of the month
Did you know
First Home Buyer Tips
January has seen 2022 off to a racing start, with the people looking to buy and homes, caravans, cars and do renovations. The arrival of Omicron and the movement into Red at this stage is having very little effect but will definitely affect us all in the coming weeks and months. Many of us will catch the virus and the hope is that it is just like a case of the flue and the reality for some will be more dramatic
We have plans in place for the Building on Basics team to make sure we can continue to support you if we are affected.
Lisa has decided to leave the BOB team to pursue other opportunities and will be finishing up on the 4th Feb. We will miss Lisa and wish her well for her future pursuits. We thank her for her contributions to the team and her support of our clients. We will keep you posted of the team changes as we finalise them.
Elise has restarted her investment training and well let’s just say it is pretty dry reading. Good to get it underway though as it will mean that we can provide a wider scope of advice to you.
We are making ongoing changes to our website and have added some mortgage calculators. Worth having a play, you can enter in your deposit or repayment details and change the interest rates around to get a sense of what you might need to save or borrow to buy a home.
We have been blogging for a while and these are all on our website. Here are the blogs from January
What are the Banks looking at when you ask for lending?
So what expenses are the banks actually looking at? All of them! They’ll be going through your accounts with a fine toothed comb, so here are some tips to get your accounts looking good for their scrutiny.
Can working with a Financial Adviser save you money?
Can using a Financial Adviser save you money? Yes! We’ve written a wee post about what we actually do, and how it can help you to get results whether you are a first home buyer or looking to get out of debt, and more!
Hot tip of the month
Skip the ATM withdrawals!
With the banks really looking at expenses and how you are using your money, ATM withdrawals give them a big question mark and if you are doing regular ATM withdrawals they will be questioning if you have a habit that you are hiding. So, keep in mind that the banks will ask less questions if you are getting a bit of cash out when you get your fuel or groceries. This will increase your transport or grocery costs so don’t go wild, especially if you have high expenses and low income. Remember – don’t make the mistake of getting cash out if you are paying by Credit Card, as this will be deemed a cash advance and interest will start occurring immediately.
Did you know?
When you go to get a loan, the lender will look at your last 90 days of transactions, in detail!! They have benchmarks for the amount you could be expected to spend for that category, for example groceries, that are led by the Government standards and their own internal analysis of client spending. If you are spending less than the benchmark the bank may still use the benchmark figure and if you are spending more, they will use the amount you declare. Regardless under the new CCCFA rules they need to see evidence through the analysis of your actual bank transactions!
First Home Buyer Tips
Buying your first home can be an overwhelming process. This is our new tips section to help you get into your own home.
Saving for the deposit is the obvious one and if you need some help to do a budget (or spending plan as we like to call it) we are here to help.
This months’ tip is to be clear on what you are looking for, whether you are a first home buyer or moving towards upgrading your property. What are the essential things you want in the home, and what are the nice to haves. Number of bedrooms, location, indoor/outdoor flow, proximity to schools and transport or other services.
By understanding what is important to you, you can then start to assess what you need to be saving for. A Financial Adviser can help you to understand the priorities for your personal situation.
We can expect to see some bumps in the road ahead this year, so it is important to make sure you are in the right fund for both your risk profile and for when you are intending to access your funds. There was a drop in the US market last week, so this will affect your balance. It really depends on your age and when you will need to access the funds as to what you will need to do. Talk to us so we can help you to prepare for what is ahead.
Well, what can we say? We weren’t counting but another adviser was – and one bank alone had 38 different policy changes in the last 6 weeks of last year. No wonder it was confusing for people to know what they could borrow and why it was taking the banks so long to do the assessments.
There has been a huge amount of media coverage about the impact of the CCCFA changes and we will continue to feel these effects for the next 6 months at least, even with the Minister agreeing to do a review. A review does not mean a change. It is like your parents saying we will think about it when you asked for something as a kid. We are holding our breath that common sense is brought back into the mix and that the actual intent of the law change to protect the vulnerable is changed to allow us to do that!
In the meantime, the banks are scrutinising every dollar you spend and saying no for crazy reasons such as one off costs. Christmas and holiday spending is seen as your regular spending. If you don’t have high income and have high expenses that is not helping. On top of this the increasing interest rates are putting pressure on the servicing assessments.
Despite those dreary factors we do have options and it best to talk to us early so we can get you the best deal and or even just get you a deal in a trying financial climate. Let us do the leg work as we have our fingers on the pulse.
Banks have removed any pre-approval given pre 1st December and many people who had pre-approvals have now got new approvals at a lower limit. Banks have withdrawn offers of lending typically over 85%. There are few opportunities for loans up to 90%.
The next OCR review is 23rd February. Commentary is mixed. Pre-Omicron in the community and the move to Red traffic lights, the talk has been of an expected increase to continue to combat the increasing inflation. My expectation is that it will move up and the banks will continue to raise their interest rates. LVR and debt servicing restrictions are also in place or coming in.
Prices have continued to increase around the country and in some regions houses that were selling quickly have slowed. This is mostly due to the banks reducing the amount of money they are lending, and the speed at which they are processing applications.
The demand for new houses and for properties for home buyers is there but the finance to enable people to buy has tightened. We are noting some investors are beginning to sell investment properties in anticipation of not being able to afford the upcoming tax bills due to the tax changes announced in March 2021. They are selling now to avoid a fire sale of the properties later in February and March.
Well that’s enough for this month! Looking forward to hearing from you, we are always available for a chat about your situation. Book a meeting at the Calendly link, or send us an email.
Until next time,
Elise and the Team