DESPITE THE RECENT new Omicron variant, consumer demand is surging against the backdrop of labour shortages, supply chain blockages and recent price increases.
All of this is causing confusion and some concern. And pundits around the world are detailing strong Inflationary pressure – which usually means interest rates are likely to increase, sooner rather than later. [Read more…]
IN REALITY, the Australian economy is showing solid growth in the metropolitan areas. And there is a flow-on effect into most regional cities – the only exceptions being those areas recently struck by drought and bushfires.
While not buoyant (and there may be a short-term pullback from natural disasters) … overall, the economic fundamentals look fine.
Therefore, we need to steer clear from unwittingly talking ourselves into recession. Because, as soon as confidence returns (and it will), consumers will start spending again. [Read more…]
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SURELY THE GENERAL PUBLIC aren’t that gullible? Maybe they are.
Everyone knows politicians tend to massage the truth to suit their purpose. However, it seams Bill Shorten is once again trying to mislead people – in much the same way as he did with the “Medi-scare” campaign, in the lead up to the last election. [Read more…]
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MY BACKGROUND TRAINING is as an economist. And yet, trying to explain such things in an easy-to-understand way can often prove rather difficult.
Australia has been more fortunate than most countries emerging from the GFC. And yet, there seems to be a certain complacency regarding our economic well-being. [Read more…]
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DO YOU VIEW your mortgages as liabilities or assets? The way you look at it can actually determine your financial success.
People often think that debt is bad and you should repay your loan as soon as possible. However, the truth is, some debt is good if used to own appreciating assets. [Read more…]
WHILE THE WORLD may be stunned by Donald Trump’s win, you’ll most likely find things will not be nearly as bad as everyone thinks.
And that’s reflected in the huge rebound in the stock market — once investors began studying his policies in more depth.
In many respects, the media is responsible for the outcome — because so much airplay was given to his outlandish rhetoric. [Read more…]
AS MANY INVESTORS would already be aware, borrowing for investing in property has become increasingly difficult over the past 12 months.
And that's because APRA (the banking regulator) has issued a warning to major banks to reduce their exposure to investment property loans.
THE CURRENT LENDING environment has changed markedly over the last two months with the main developments being:
IN THE CURRENT low-rate environment, demand for property funding has spiked considerably over the past couple of years, fuelling some concerns in various quarters for a property bubble.
As a result, most of the major banks have loan portfolios heavily weighted to property.
Slowly but surely, this has resulted in increased competitiveness for the small business sector, which has resulted in some attractive terms being offered for small business loans.
Below are some tips about business loans in the current market. These will be useful if you are looking at purchasing a small business or expanding your existing business:
If you have equity in residential property, you may be able to borrow at home loan rates.
The major banks tend not to allow business purpose for loans through their home loan departments, and will unnecessarily sell their customers into more expensive business loan products.
If you have equity and can afford the repayments, there is no reason to have a bank overdraft (sold at rates up to 13% pa) or even bill facilities that are subject to frequent review.
Before taking out a business loan secured by a residential property, explore the market for possible home loans for business use, they will be much cheaper and more flexible.
A suitably qualified mortgage adviser will be able to do this for you at no cost.
Most businesses live and die on cash flow. Therefore it is important to look past just the interest rate and fees on a loan and consider actual repayments.
This is the major benefit for using home loans where there is sufficient equity in residential property as they can be taken out interest only and usually rolled over continually.
Banks offer “unsecured” business loans against some businesses.
But these are subject to sharp amortisation periods (anywhere from 1-7 year loan terms). So consider the actual repayments as well as the rate before progressing with a particular loan product.
You are unlikely to get over 50% of the purchase price of a business. The exception to this is for well-established franchises, for which borrowing can be as high as 70%.
As discussed earlier, you may be able to use equity in property to bridge the gap, but you need to consider from where the capital will be raised.
If you are purchasing a franchise, banks will hold approved franchise lists outlining the terms that the bank will extend against a particular business.
It is worth speaking to more than one bank (or engaging a mortgage adviser to do it for you) to make sure you are getting the best deal as banks will vary on terms extended against each franchise.
For existing businesses there are many different types of financing that can assist with cash flow and growth strategies.
These include the following:
BOTTOM LINE: Too many business owners learn about these products only when they are in difficulty. Smart management demands that the right debt strategy be an integral part of any business planning.
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THE RBA RECENTLY confirmed a neutral bias, when it announced its latest decision to keep the official interest rate on hold.
Inflation appears to be relatively steady — and still well within the RBA’s stated band for comfort.
Furthermore, the feedback from the Residential market is that house prices in Sydney and Melbourne now appear to be levelling out.
The RBA was keen to see the Residential market slow somewhat. However, if that doesn’t remain the case, it may need to look to increase in interest rates. [Read more…]
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WHERE ARE WE right now? And what actually determines the Cycles for each sector?
As it happens, most people believe every sector is quickly affected by interest rate movements. Whereas, that’s not strictly true.
And where interest rates do have an effect … the actual timing of that also varies. [Read more…]
