Mortgage

GOODBYE EUROZONE?

The long running soap opera around whether the Eurozone will break up is now into its eighth year!

In 2015 all the focus was on the latest Greek tantrum and last year the big fear was that the populist/nationalist Brexit vote and Trump victory would lead to a surge in support for populist parties across Europe and drive a Eurozone break up.

There was no sign of this in Spanish and Austrian elections, but this will be put to the test again with elections this year in the Netherlands, France, Germany and maybe in Italy.

The fear is that a Eurozone break up will plunge the world’s third biggest economic region into recession and financial chaos, which would adversely affect the global economy and Australia. Such a fear may be exaggerated – the UK hardly imploded after Brexit – but that’s the worry. 

Read more

Where are we now?

It’s now a decade since the first problems with US sub-prime mortgages started to appear and nearly eight years since share markets hit their global financial crisis lows. From those lows in 2009 lows US shares are up 239%, global shares are up 167% and Australian shares are up 80% (held back by relatively higher interest rates, the absence of money printing, the plunge in commodity prices from their 2011 highs and the high $A).

An obvious question is how close the next downturn is, which ultimately relates to where we are in the investment cycle. 

Read more here

Rates Remain On Hold

As expected, the Reserve Bank of Australia decided to keep interest rates on hold at 1.5%. But according to Macquarie, we can expect two more cuts this year before economic economic conditions begin to turn around. Watch here.

Rick Maggi

Interest rates remain on hold

Happy Melbourne Cup Day!

The Reserve Bank Board met today and decided to keep official interest rates on hold at 1.5%.

The recently released September quarter inflation data confirmed that underlying inflation at 1.7% year on year was broadly in line with expectations, with fruit and vegetable price rises being offset by lower petrol prices on average. This release is probably the key determinant of the RBA's decision.

Macquarie Bank forecasts the most likely timing of further interest rate cuts to be February and May next year, as inflationary forces remain subdued.

The last RBA board meeting for 2016 will be held on Tuesday 6 December.

Next stop, US elections.

Rick Maggi

Interest Rates On Hold

interest-rates-rickmaggi-westmount-financial

Now that the weekend's grand final sporting festivities have come to a close, I'd like to draw your attention to today's rate announcement and the thoughts on why the Reserve Bank of Australia has made this decision. 

In making this call, the RBA has resisted temptation to further lower rates, opting instead to wait until the September quarter CPI data is released to allow it more time to measure the impact of the August rate cut.

Home values rise 1.1%

property-prices-rick-maggi-westmount-financial.jpg

The CoreLogic Home Value Index recorded a 1.1% rise in dwelling values in August, with six of the eight capital cities recording a lift in dwelling values over the month. Performance of the combined regional areas remained comparatively soft, with dwelling values virtually flat at -0.1%.

The strong combined capital cities headline result masks the underlying movements associated with dwelling values which are trending differently from region to region and across the broad property types.

property-prices-rickmaggi-westmount-financial

In Sydney and Melbourne, dwelling values continued to increase at more than 1% month-on-month, with the cumulative growth (June 2012 to date) now reaching 64% in Sydney and 44% in Melbourne. Outside of Sydney and Melbourne, the third highest rate of capital gain over the same period was Brisbane at 18%, and was as low as 4% for Darwin.

The most recent twelve month period has seen dwelling values rise by a lower 7% per annum, with Perth and Darwin the only capital cities to record a fall in dwelling values over the same period, dealing by 4.2% in both cities. Softer economic conditions and a significant fall in overseas migration rates, together with an increasing net outflow of residents to other states and territories, has made a substantial dent in housing demand, reducing values and rental returns.

Read the full report here.

Interest Rates Steady

interest-rates-steady-rickmaggi-westmount-financial.jpg

The RBA has resolved to keep interest rates on hold at 1.5 per cent ahead of a possible US rate hike on 21 September and the release of Australian CPI figures on 26 October.

As expected, RBA governor Glenn Stevens’ final meeting before handing over the reins to his successor Philip Lowe proved to be uneventful.

The decision to keep rates on hold was in line with market expectations, with the ASX 30 Day Interbank Cash Rate Futures September 2016 contract pricing in a 95 per cent chance of ‘no change’ to the cash rate.

UBS chief economist Scott Haslem said the RBA is likely to remain on hold for the “foreseeable future” given firm growth data, a likely lower trend in the Australian dollar and concern about financial stability.

“While inflation will remain low, core inflation is likely to drift modestly higher from here,” Mr Haslem said.

The ANU Centre for Applied Macroeconomics Analysis (CAMA) Shadow Board attached a 57 per cent probability to 1.5 per cent being the correct policy setting.

“The CAMA RBA Shadow Board clearly believes that the cash rate should not be cut any further,” said the Shadow Board. “After the RBA’s decision in August to cut the cash rate to a historic low of 1.5 per cent, there is good reason to pause.

“Unemployment fell slightly, but only because of a large increase in part-time employment. With consumer price inflation equaling 1 per cent year-on-year, well below the RBA’s 2-3 per cent target band, and wage growth a modest 2.1 per cent year-on-year, there exist little immediate inflationary pressures,” said the Shadow Board.

Rick Maggi

The Great Policy Rotation

The Great Policy Rotation

For the last two decades, advanced country central banks have been focussed on price stability and have played the first line of defence in stabilising the economic cycle whereas fiscal policy has played back up, focussing more on fairness and efficiency. But we are starting to see debate about whether a new approach is needed. AMP Capital's Dr Shane Oliver discusses what a shift in policy approach (from monetary to fiscal policy) might mean for investors.

Interest rates cut to 1.5%

Interest rates cut to 1.5%

The Reserve Bank Board (RBA) met today and cut the official interest rate by 0.25% to 1.5%. This decision had been widely anticipated, as expectations of declining inflation for the June quarter were realised with the data released in late July.

UK votes to leave

uk-brexit2-rick-maggi-westmount-financial.jpg

With UK voters narrowly voting to leave the EU markets, and Prime Minister David Cameron announcing his resignation, markets are reacting quite negatively to the news, as expected.

As outlined in the email the blog post below, the ‘Leave' vote will create a period of instability over the coming days and weeks, creating a potential buying opportunity in the short term. This may also add to the case for the RBA to cut interest rates, which was likely to happen anyway.

We’ll continue to monitor the situation, but in the meantime, it is important not to get too perturbed by the media frenzy as this is likely to be a storm in a teacup.

Enjoy your weekend (and stay away from the newspapers!).

For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.

Budget SPECULATION RIFE

Fed-Budget-rick-maggi-westmount-financial.jpg

There will be added interest in the Federal Budget announcement next week (May 3rd) as it's likely to be the final major economic statement the Government makes before the election later this year, quite possibly July 2nd. With the opposition taking a strong stance on capital gains tax and negative gearing, we're looking at a focus this year on taxation. Corporate tax could be cut by up to 1.5% however, there is likely to be minimal, if any, relief in terms of personal income tax.

There may also be some changes to superannuation. Some potential changes might be reduced contribution caps, the concessional 15% tax on super contributions, an end to 'Transition to Retirement' pensions and taxes on superannuation pension payments.

Overall, the outlook is for minimal growth in government spending, with spending offset by savings elsewhere in the Budget.

Where sharemarkets are concerned, historically we have seen some sideways tracking in past election years, but there has been no evidence to date of a lasting impact caused by an election. In fact, Australian economic growth has actually been strong during election years since 1980.

We'll be watching the announcements closely next week and will keep our clients informed of any meaningful developments.

For more information, contact Rick Maggi on 9382 8885 or rickmaggi@westmount.com.au.

02/02/16:Super or the mortgage?

Plan-or-Plan-B.jpeg

Many people wait until their home loan is paid off before investing more in super. However, if you are currently making more than the minimum home loan repayments, you may be better off when you retire if you make additional super contributions instead. Super or Mortgage?

For more information, contact Rick Maggi at Westmount Financial on 9382 8885.

26/10/15: Offset Accounts: Better balance

...a better way to manage your mortgage

If you want to repay your mortgage quickly and still have easy access to your additional repayments, an offset account may be worth looking into. Read more here

For more information, contact Rick Maggi at Westmount Financial on 9382 8885.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.

03/09/15: Keys to de-stressing a mortgage

The causes of mortgage stress...

Don't sail out farther than you can row back. This Danish saying is sound advice for anyone thinking of borrowing to buy a home, particularly now that interest rates are low and house prices have risen sharply.

According to a paper for the Centre of Policy Development and University of Canberra, Australians have a tendency to be over-confident in our ability to repay loans. We also underestimate the likelihood of things potentially going wrong in our lives.

Have you ever heard yourself or someone else say "I'll be able to repay my loan, provided I keep my job, don't get sick and I'm not hit with any large unexpected bills"? Chances are you probably have. but things can and often do go wrong.

Read 'Destress your mortgage'

For more information, contact Rick Maggi at Westmount Financial on 9382 8885.

Rick Maggi Westmount Financial Clear Focus. Better Solutions.