Black & White Finance update - November 2018
Welcome to the November 2018 Black & White Finance update! We have two wonderful customer experiences to share with you and our usual “snack-sized” property and finance summary so you have some nerdy fun facts to showcase at your Christmas parties - enjoy!
Amazing experiences - going the extra mile
Approved and settled in 10 days. Matt and Renae were referred to Black & White Finance by an existing customer of ours. After being originally declined by their existing bank, one week out from their settlement, you could imagine how stressed and anxious they were. We turned this around for them quickly, settled the matter with no penalty interest and is the type of customer experience we’re proud of, see what they had to say below:
Saving Kylie and Scott $10,500 each year. Here's what they had to say below:
Thank you, thank you, far too kind. Matt, Renae, Kylie, and Scott, we very much appreciate the time you've taken here for us - you guys rock!
"Snack sized" summary
What is happening with interest rates? The Reserve Bank of Australia (RBA) generally look at 3 main triggers when deciding on what to do with interest rates - inflation, unemployment, and wages. At the moment, economist believe the rate of inflation isn't moving soon. The RBA and all of their staff can basically go on a holiday and come back in 12 months to an unchanged economy, as some economists are forecasting.
See below the latest RBA assumptions, for those that would like to look at the numbers:
You will notice that all the way up to 2020, the RBA expect the inflation rate (labelled CPI inflation on the 3rd row) to be at 2.25% and not high enough to force their hand to increase rates. Typically, the RBA likes to achieve over time an average inflation rate of around 2-3%. If we go over this, then there is pressure on all prices in our economy, but, it doesn't look like we're heading anywhere near the 3% mark for a while.
The RBA’s decision to change rates also has a lot do with wages and if wages start to increase, then we will see the RBA step in and try to slow things down. Yes, Australian wage growth has continued to lift in the year to September 2018, increasing at the fastest pace in 3 years, but it’s not been high enough to springboard a rate increase from the RBA. There’s the talk of potential labour shortages in the workforce and when this occurs, wages to tend to tick upwards – see below what’s forecasted by the RBA going into 2020 and what has happened since the year 2000 with wages.
Many economists believe with the unemployment rate now at 5% as of September 2018, and these wages on the slight upward trend, the next move in the cash rate is up but not until the end of 2019 or somewhere in 2020. Experts are saying we need to be at or under this 5% unemployment rate for a while before we see pressures on wages, then as a flow-on effect on the RBA to make a move.
The summarised view on rates:
With these employment figures, a slight increase in wages, and the population growth anticipated, these are potential factors which could support weakening property prices and the economy in general. The bank's interest rates aren't going anywhere for a while, until the end of 2019, or 2020 given the domestic activity here in Australia - unless we see some drastic changes.
Property prices and first home buyers on top of the world:
With these domestic economic conditions and the lending restrictions being applied by our banks in response to regulatory concerns, predictions from Morgan Stanley, BIS Oxford Economics, SQM Research, and Deloitte, state the total peak to trough declines in Sydney and Melbourne could reach between 5-17%. This is great for first home buyers who have benefited from this phase of the property cycle. According to QBE Ceo Phil White, lending to first home buyers nationally has increased by almost 30%, and in our biggest market of Sydney, we've seen first home buyer lending increase by 74% - incredible really.
We’ll leave you this month with the below QBE Australian Housing Outlook 2018-2021. QBE partner with BIS Oxford Economics to do this deep analysis and provide this 3-year outlook.
Ask us something
We are keen to hear what you think and also keen to receive your questions. If you want to know more about each banks requirements, or of some great terms, or rates on offer at the moment, please send a note to peter@blackandwhitefinance.com.au or simply call 0448890186. Once again, thank you for reading.
* Your full financial situation would need to be reviewed prior to any acceptance of any offer or product. Subject to lenders terms and conditions, fees and charges and eligibility criteria.