Anthony Smith Mark Boulton Ph: 03 9585 7779 Ph: 03 9585 7779 Fax: 03 8610 0365 Fax: 03 8610 0365 Mob: 0413 439 761 Mob: 0403 047 147 anthony.smith@ mark.boulton@ mortgagechoice.com.au mortgagechoice.com.au

Surfing the tsunami
What a difference twelve months can make. In the space of little more than a year, our economy has seemingly shifted from happy-golucky to down-in-the dumps. But with some commonsense strategies it is possible to surf the economic tsunami and even set yourself up for the next boom. First, the bad news In February 2009, the Reserve Bank of Australia (RBA) acknowledged Australia is heading for tough times as we face “unusually sharp falls” in international trade and production. Though the Chinese economy continues to grow, the pace has slowed and this will impact our own economy. Dr Shane Oliver, Chief Economist of AMP Capital Investors notes, “Despite another interest rate cut and massive fiscal stimulus, consumer confidence fell in February. And while employment unexpectedly rose by 1,200 jobs in January, it is not keeping up with growth in the labour force, so unemployment rose from 4.5% to 4.8%”. He adds, “By

Autumn / Winter 2009 Newsletter

year end unemployment is likely to have reached 7%”. …and on the plus side There are some bright spots amid the gloom. Australians have benefited from substantial cuts in interest rates along with falling fuel prices, reduced inflation and the cash handouts that were part of the Government’s December stimulus package – with more to come. In fact, many households are coping well with the economic downturn. Research by the Mortgage and Financial Association of Australia (MFAA) found 75% of mortgage holders are easily meeting their home loan repayments, and there has been a 3% increase in the number of people considering taking out a home loan. Angus Raine – CEO of property group Raine & Horne, says first home buyers are flocking to take advantage of the First Home Owner Grant, boosted from $7,000 to $14,000 for Continued on p2...

Jill O’Connor Chris Howitt Craig Micallef Ph: 03 9585 7779 Ph: 03 9333 4370 Ph: 03 9308 9163 Fax: 03 9333 4376 Fax: 03 9308 9257 Fax: 03 8610 0365 Mob: 0401 334 599 Mob: 0417 655 577 Mob: 0412 647 506 jill.oconnor@ craig.micallef@ chris.howitt@ mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au

Mitch Jones Stephen Forrester Shaun Curtis Ph: 03 9773 3438 Ph: 03 9773 3438 Ph: 03 9585 7779 Fax: 03 8610 0365 Fax: 03 8610 0365 Fax: 03 8610 0365 Mob: 0423 720 340 Mob: 0412 881 907 Mob: 0409 250 347 mitch.jones@ shaun.curtis@ stephen.forrester@ mortgagechoice.com.au mortgagechoice.com.au mortgagechoice.com.au

Mortgage Choice Limited 302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and operated by Gracetree Group Pty Ltd ATF Gracetree Trust ABN 47 921 528 245

Considering taking advantage of the First Home Owners Boost?
It’s time to get moving, because this additional assistance applies to all contracts entered into by 30 June 2009. Not sure how to go about it? Talk to Mortgage Choice about obtaining a home loan pre-approval. A loan pre-approval gives you a clearer understanding about how much you could borrow, so you can go property hunting with confidence! You will need to provide documentation including a statement of earnings (most recent payslips), your current assets or liabilities (ie credit cards or other loans) and 100 points of ID (eg drivers licence, passport etc).

Who can receive the Boost?
First homebuyers who enter into a contract before 30 June 2009 will receive $14,000. First homebuyers who purchase a newly constructed home will receive a grant of up to $21,000.

INSIDE • Maternity leave & your mortgage • Making your equity work for you • Investor tips

...continued from p1 the purchase of an existing home or $21,000 for new constructions. At the same time, investors are being attracted back to property by low interest rates and high rents. Raine warns, “Investors are sure to find themselves shoulder-to-shoulder at auctions with cashed up first timers.” Protecting yourself against redundancy While the threat of rising unemployment shouldn’t be overlooked, a survey by ING shows an unexpected degree of confidence in job security, with 61% of respondents believing they won’t be impacted by job losses. ING Australia’s Gerard Kerr says, “Whether this view on job security continues through 2009 remains to be seen. Although this optimism is a great attribute, it becomes a concern if people don’t have a plan in place to protect themselves if they lose their job.” Given the present economic uncertainty, it makes sense to develop a back-up plan, preferably focusing on debt reduction and building a pool of savings. Revisiting your household budget is a useful way to identify areas where cutbacks can be made to free up spare cash. Take a look at websites like www.understandingmoney.gov.au, which features a budget planner that can be downloaded free of charge. For workers who do receive the dreaded call into the bosses office, it’s vital to think about how you’ll manage regular commitments like the mortgage, bearing in mind that a redundancy payout may need to stretch for a long period if it takes time to land another job. The MFAA’s Phil Naylor says, “If you find that the current economic situation is over-extending your budget, we urge you to seek mortgage advice. The worst thing a person struggling to repay their mortgage can do is stick their head in the sand and cross their fingers”. He adds, “If you or your partner lose your job, it is important to let your lender or broker know. The trick is to act quickly. The earlier you seek help, the more likely you are to have a positive resolution.”
Sources: ING Investor Dashboard Survey, December 2008; MFAA Survey / Bankwest Home Finance Index.

Reserve Bank of Australia
The workings of the Reserve Bank of Australia (RBA) can appear somewhat mysterious. But with the power to raise and lower the country’s official interest rates, the RBA has an enormous impact on what we pay each week for our mortgage. The RBA controls the official cash interest rate, which determines the interest rate that the RBA charges when it lends money to the banks or other lenders. While the rates that lenders charge are influenced by this cash rate, the decision of what rate they pass on to consumers is also influenced by their own profit margins and the rates charged by other sources of funds they might use. The official cash rate is a mechanism that the RBA often uses to control inflation, which it prefers to keep within a target range of 2 percent to 3 percent. By increasing the cash rate, it increases the rates charged by mortgage lenders, putting the brakes on the ability of households to spend money on other goods. This has the impact of driving inflation down. According to the financial commentator and chief executive of the accounting firm accountantsRus, Adrian Raftery, this was the goal of the RBA in the first half of 2008. “In the first half of last year the inflation rate was getting out of this target range, due to the higher oil prices which were feeding into the prices of household items,” Raftery says. “As a result the RBA raised rates to try and contain inflation into its target.”

The RBA can also encourage spending by reducing its cash rate, provided that lenders pass the lower rate along to consumers by reducing their own mortgage rates. Raftery says the global financial crisis led the RBA to drop rates to encourage spending, in an effort to prevent the economy from stalling.

Raftery says that when the RBA changes the cash rate, lenders normally change the interest rates they charge on their home loans, credit card and business loans. But this is not mandatory.

“Lenders may also change their interest rates even if the RBA has not changed the cash rate,” Raftery says. “This is because the funds they lend out as loans come from various sources. If the cost of money from those other sources changes they will generally pass that change onto your loan.”

Maternity leave from the mortgage
The patter of tiny feet is a source of joy and your home loan lender may join the celebrations, offering maternity leave from the mortgage. Australia has been experiencing something of a baby boom lately, and for couples with a mortgage, it’s good to know that many lenders offer a ‘pregnancy pause’ – a feature worth looking for when selecting a home loan. How it works A pregnancy pause can work in several different ways, either offering a ‘repayment holiday’, meaning loan repayments are suspended for a set period (usually three months); or you may be able to reduce the loan payments, often by half, for up to six months. The downside For new families, taking maternity leave from the mortgage frees up valuable cash but it can come at a price. The loan repayments, once resumed, may be increased to ensure the loan is paid off within the original term. Alternately, the term may be extended. Both are contingencies which new parents should consider when their thoughts turn to bibs, bottle and bootees.

Reserve Bank

Making your equity work for you
The largest source of equity for most Australians is the family home. Borrowing against your home’s equity could allow you to fund a home renovation project, purchase another property or refinance an existing mortgage. What is equity? Equity is the difference between what your property is worth and what you owe. For example, if you have $300,000 remaining on your home loan for a home worth $600,000 - you have $300,000 in equity. How much you can borrow against your equity is calculated by taking into account your existing borrowings, income, assets etc. If, for example, you decide to use equity to buy an investment property, the lending institution will assess the value of your property as well as the new one. The benefits of borrowing against your equity, rather than taking out a personal, investment or business loan, is that the interest rate will generally be lower and you can take the loan for a longer term. Emma, 34, who now owns a three bedroom home in Sydney’s inner west, gained her foothold in the property market at age 24. Her first property was a conveniently located, compact one bedroom unit in Sydney’s inner west on a busy road that she purchased for $140,000. After four years of mortgage repayments and with an appetite to buy more property, she used the equity in her first property (which had risen due to a solid lift in the value of her property) to buy a second one – a unit that was twice the size of the first and on a much quieter street. “Using the equity in my first property enabled me to upgrade to a bigger, more comfortable property in a more ideal location,” Emma says. “I am glad I had the opportunity to gain my foothold in property at a relatively young age. I was also fortunate that the property market was very strong during those years, which meant that the value of my property increased enough to enable me to buy a second unit using the equity in my first property.” After selling both properties in recent years, Emma bought a three bedroom, double brick freestanding home with the help of a substantial deposit and with the added boost of her partner’s income. “I’m really excited to be living in the home I’ve always wanted. And right now, interest rates are being very kind to us and my mortgage is on par with my last one. It’s very manageable.” If you are thinking of using your equity to buy an additional property or to buy a new car, it is important to remember that using equity in your home is a significant financial decision - and you need to ensure that your financial situation will be improved by taking this big step. Talk to your accountant or financial advisor about your financial situation if you have any queries. For more information about using equity in your home, speak with your local Mortgage Choice broker.


Tips to help investors stay on top
• Visit your broker regularly to ensure you have a suitable loan for your current needs. Over the course of a long-term property investment, the type of loans available and your personal circumstances can change significantly.

Congratulations to the winner of the Spring/Summer Escape on your dream holiday competition. Ms K Gibson from North Rocks has won $6,000 to spend at Flight Centre.

of the costs associated with them. If there are loan features that you aren’t using, speak to your broker as you may save money by trimming them.

• When interest rates fall, consider keeping repayments at the previous level which could help you increase your equity and pay off your loan quicker! If you have an interest-only loan this could further reduce your loan interest. • Maintain a dialogue with your broker and accountant or financial adviser if you are considering making changes to your investment property strategy. • Speak to your local Mortgage Choice broker if you have any questions about your property investment loans.

• Obtain a property evaluation annually to determine whether you could use your equity to invest in additional properties. • Review your investment loan features and be aware

Mortgage Choice Limited 302 Charman Road CHELTENHAM VIC 3192 Phone 03 9585 7779 Fax 03 8610 0365 www.mortgagechoice.com.au/cheltenham1 This franchise is independently owned and operated by Gracetree Group Pty Ltd ATF Gracetree Trust ABN 47 921 528 245

when you settle a New Mortgage with Mortgage Choice
Simply call 1300 302 668 to make an appointment with one of our loan consultants and request to be entered into the draw.
At Mortgage Choice we make getting started simple, from finding a home loan that suits you, to taking you through the whole application process. Whether you are buying a new home, refinancing, consolidating debt, investing in property or financing a renovation, talk to the specialists. Mortgage Choice offers: • Wide choice: We have many of Australia’s leading banks and lenders on our panel who offer collectively hundreds of home loan products • Professional home loan advice • Local knowledge: We’re Australia’s leading mortgage broker because we combine local knowledge with over 15 years experience

The Key to Success
“While it is too early to announce a solid turn around, clearly there is increased interest in property. The rules remain, buying in this market is sensible provided purchases are well priced and the properties are well positioned and have the capacity to rent at improving yields. But don’t panic even if it feels like your opportunity is passing. I suspect that bargains will be there for some time as our economic period of adjustment has a little way to go yet. The key to success in this market is making sure your investment is priced right.” John Edwards, CEO, Residex

Call now on 1300 302 668 or fill in your contact details below and
• Fax it to: (02) 9954 4913 or • Mail it to: Mortgage Choice Win $6,000 off your New Mortgage promotion Reply Paid 74789, North Sydney NSW 2060






WIN $6,000 OFF YOUR NEW MORTGAGE PROMOTION: To enter, either visit www.mortgagechoice.com.au and complete the online entry form or complete the entry form enclosed in the Mortgage Choices Autumn/Winter 2009 newsletter during the Promotion Period and you’ll be entered into the draw. The opening day of the competition is 11/05/09. All entries must be received by Mortgage Choice at the address above by 5pm EST on 29/07/09. The draw will be held at 4pm EST on 30/07/09 at the offices of Mortgage Choice. The name of the winner will be published in the Australian on 04/08/09. For the purpose of this competition, a ‘NEW MORTGAGE’ is a: 1) new mortgage; 2) refinanced mortgage; or 3) mortgage top-up exceeding $6,000, SETTLED WITH A MORTGAGE CHOICE BROKER DURING THE PERIOD FROM 11/05/09 TO 11/11/09. There will be 1 draw and the first valid entry will win. Complete terms and conditions and the privacy notice are available from www.mortgagechoice.com.au. The promoter is Mortgage Choice Limited at Level 10, 100 Pacific Highway, North Sydney NSW 2060. Authorised under NSW Permit No. [LTPS/09/01347], ACT Permit No. [TP 09/00591], VIC Permit No. [TP 09/562], and S.A. Permit No. [T09/379].

Melbourne’s median house price for the December quarter was $426,000, a decline of 0.9% over the quarter and a drop of 9.7% between December 2007 and December 2008. The median price of units and apartments in the December quarter was $365,000, a 1.1% decline from the previous quarter. The largest impact has been felt in the upper end of the market. In the December quarter 2007, 16.4% of residential property transactions were above $800,000 compared to 11.8% this quarter. The December quarter 2007 signaled the end of the property boom, which at its height saw an unprecedented level of transaction numbers and unsustainable price growth. REIV research confirms that since the end of 2007, demand for property in Melbourne’s more affordable market suburbs has increased while demand for more expensive property has reduced. This trend would also have been influenced by the increase in the first home buyer’s incentives and the reduction in interest rates late in 2008. The demand for more affordable property has also helped property values in some regional centres. In general the regional centres have shown a more steady appreciation over the medium term than Melbourne.
Written by Real Estate Institute of Australia for Mortgage Choice Privacy: There will be occasions where we would like to send you valuable information directly related to property finance, as well as other related offers, tips and opportunities. However should you wish to receive only certain types of information or nothing at all, please contact your local franchise principal. Disclaimer: The content of this newsletter is written expressly for education purposes and is based on the opinions of the authors. The authors and agents for the authors are unable to accept any liability or responsibility whatsoever to any error or omission or any loss or damage of any kind sustained by a person or entity arising from the use of this information. It is recommended that you seek professional advice relevant to your specific circumstances before acting on the information based in this document.