Monday, April 30, 2012

The Catch with UBank's Home Loan UHomeLoan

UBank's UHomeLoan has been offering one of the lowest interest rates that I have seen from a subsidiary of a Big Four Bank. At 6.59% with a possible 0.2% discount for loyalty, and then even the possibility of getting $500 back if you are already a UBank customer, it took me quite a while to understand why the whole nation was not refinancing with UBank.

Who's UBank?

First of all, one major reason from talking with friends is that people are afraid of signing up to UBank because they practically never heard of it. It's only when you mention to them that it is a part of the National Australia Bank that they feel a little more at ease.

All Online (Skype even)

The second thing is that everything is online. For someone who is pretty savvy with the internet, this is definitely not a negative point for me. On the contrary, I prefer dealing with the internet than some customer "service" officers in a bank.

So what if there's no offset?

The third point is the technical point that many newbies like myself may not know. It involves negative gearing which is a big issue since one in seven taxpayers in Australia are property investors, according to the ATO. The problem is, UHomeloan does not have an offset account. Apparently if you start with a home loan of $250,000 and you pay it down to $100,000 for example, and then you buy another house with the intention of using the current house as an investment property, it may not be good for tax purposes to have no offset account. This is how it was explained...

House 1 becomes your investment property so because you can claim tax deduction on your interest rate repayments, you want to be paying MOST of your interest on this property since it is tax deductable. However, when you take out, say, $80,000 from your existing loan to buy House 2, the ATO may not like this because in some ways, your interest repayment is inflated on House 1. You were down to paying interest on only $100,000 but when you claim your tax deduction, its now based on ($100,000+$80,000 =) $180,000. This is obviously not financial advice and I have kept this explanation quite general to reflect that but basically, when you have an offset account, you wouldn't have this problem. If you are not planning to leapfrog from one property to another in the future, then you wouldn't have a problem with UBank not having an offset account. So I finally worked out what you could say is the "catch" behind a very good deal.


Other posts on UBank 


New Home Sales Lowest Since 1994

It was the year Forrest Gump, Dumb and Dumber and the the Lion King were showing at the movies, the Gulf War was brewing, Michael Jordan made his first comeback to the NBA and  I was in my first year of high school. 1994 was the last time that new home starts in Australia have been this low. In March 2012, only 5443 new houses across the country were sold which was the lowest number since May 1994 almost 18 years ago. In WA, new home sales dropped 12% in March which was second to Queensland's 15.3% drop according to the Housing Industry Association.

Most analysts are predicting a 25 basis point cut tomorrow when the RBA meets.

Monday, April 23, 2012

Again Real Estate Lets WA Down

COMSEC released today findings that see the West Australian economy running rings around the rest of the country to the point that analysts needed to look at Australia's economy in two metrics - one including WA and one without WA's figures.

WA was on top in five of the eight economic inidicators - retail spending, economic growth, equipment investment, unemployment and construction work. Economic output was 32% more than the average in the last10 years in WA, construction was 82% above decade averages and retail spending 21% above average. In population growth, we were second. However, when it came to the two real estate indicators, dwelling commencements and housing finance, WA is in the middle of the pack with dwelling starts 15% below the decade average. There are signs that housing finance will improve in the coming months for WA as February recorded almost 20% improvement from a year ago.

Thursday, April 19, 2012

Less Real Estate Agents as Market Stagnates

A recent article that came out in the Business Review Weekly claims that the number of real estate agents has dropped significantly. RP Data reports that last year the total value of home sales dropped 18% to $180.9 billion across the country. As a result, the number of real estate agents fell by 1,800 during 2011.

Here in WA, the number of houses sold in 2011 dropped by a massive 40%!!Whilst there are always choruses of agents singing about the recovery, let's not lose sight of the fact that this figure was the lowest number in 20 years (REIWA president said this, not me).

Tuesday, April 17, 2012

Hoon suburbs in Perth

Police have released figures that effectively gives homebuyers a sneak peek at what their potential suburb will be like to live in. However, these figures may not be what you were expecting, because it is not about the number of burglaries. Instead, it is the number of complaints made to police for hoon behaviour.

Rockingham has reported 107 complaints in the first 3 months of the year. This was followed by Thornlie, Baldivis, High Wycombe, Canning Vale and Armadale registering around 80 complaints each. However another way of looking at these statistics could be that there are more vigilant neighbours more willing to report hoon activity in their suburbs.

Friday, April 13, 2012

ANZ goes out on a limb

Not sure if you all noticed, ANZ today lifted interest rates by 0.06%. They are the only bank to have increased interest rates after the RBA decided that there was no need to change interest rates.

Tuesday, April 3, 2012

RBA leaves rates unchanged


Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.
Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Several countries in Europe will record very weak outcomes, but the US economy is continuing a moderate expansion. Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future. Conditions around other parts of Asia softened in 2011, partly due to natural disasters, but are not showing signs of further deterioration. Some moderation in inflation has allowed policymakers in the region to ease monetary policies somewhat. Commodity prices declined for a few months last year and are noticeably off their peaks, but have been relatively stable for a while now, at quite high levels. Australia’s terms of trade have peaked, though they remain high. 
Financial market sentiment has generally continued to improve in recent weeks and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs are tending to decline, though they remain higher, relative to benchmark rates, than in mid 2011. But the task of putting European banks and sovereigns onto a sound footing for the longer term remains large and Europe will remain a potential source of adverse shocks for some time yet.
In Australia, growth in domestic demand ran at its fastest for four years in 2011, driven by private spending. Nonetheless the balance of recent information suggests that output growth was somewhat below trend over the year. There are differences in performance between sectors, and considerable structural change is occurring. Labour market conditions softened during 2011, though the rate of unemployment has been little changed for some time.
Interest rates for borrowers remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft. The exchange rate has remained high over recent months, even though the terms of trade have declined somewhat.
In underlying terms, inflation was around 2½ per cent in 2011. CPI inflation was higher than that but will fall over the next quarter or two. It is currently expected that inflation will be in the 2–3 per cent range over the coming one to two years. This forecast abstracts from the effects of the carbon price and also embodies an assumption that productivity growth in the economy increases somewhat as a result of the structural change now occurring. At its next meeting, the Board will have the opportunity to reassess the outlook for inflation, taking into account not only data on demand and output but also forthcoming information on prices.
The Board eased monetary policy late in 2011. Since then, its judgement has been that, with growth expected to be close to trend, inflation close to target and lending rates close to average, the setting of monetary policy was appropriate. The Board's view was also that, were demand conditions to weaken materially, the inflation outlook would provide scope for easier monetary policy. At today's meeting, the Board judged the pace of output growth to be somewhat lower than earlier estimated, but also thought it prudent to see forthcoming key data on prices to reassess its outlook for inflation, before considering a further step to ease monetary policy.

Monday, April 2, 2012

Building Approvals Drop Unexpectedly 7.8%

The Australian Bureau of Statistics has released figures showing that building approvals in February 2012 actually fell 7.8% which was against market expectations as many commentators were expecting a modest improvement in approvals. It sets up the scenario, along with the inflation rate at the lower end of expectations, where the RBA may consider dropping interest rates tomorrow at their monthly meeting. Homeowners will be keeping an eye on the chairman's announcement tomorrow and then the banks to see who follows.

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