Resi Flexi Options Just Keeps Getting Better

By now you would be aware of the Resi Flexi Options product. Improvements to pricing and the service offering is only part of what makes this product stand out.

To further enhance the Resi Flexi Options product, Resi is now offering reduced rates on Owner-Occupied and Investment pricing.

New rates for Owner Occupied applications:

  • Variable up to 80% LVR P & I 3.74%
  • Variable rate 80-90% LVR P & I 3.79%
  • Fixed 2 and 3 year rate up to 90% LVR 3.74%

New Investment rates:

  • Variable up to 80% LVR P & I 3.94%
  • Variable 80-90% LVR P & I 4.26%
  • Fixed 2 & 3 Year to 90% LVR 4.04%
  • Fixed 2 & 3 Year to 90% I/O 4.14%

The above rates combined with no application fee, free standard valuations and a 48hr assessment turnaround time makes the Resi Flexi Options the choice for all Owner Occupied and Investment applications.

Download Resi Rate Card 29/04/19

Sales Team 1800 737 448 option 1 or

Craig Herden National Sales Manager 0478 537 841
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Jason Hulbert BDM VIC 0468 755 419

ATO Audit Finds Nine Out of Ten PIs Make Tax Deduction Mistakes

By Paul Bennion, Managing Director of DEPPRO

Source: Deppro

A survey by the Australian Tax Office (ATO) has found that almost nine in ten property investors who claim tax deductions on their rentals are making errors.

ATO auditors recently completed over 300 audits on rental property claims and found errors in almost nine out of 10 returns reviewed.

In particular, the audit found common mistakes such as incorrect interest claims for the entire investment loan where it has been refinanced for private purposes, incorrect classification of capital works as repairs and maintenance, and taxpayers not apportioning deductions for holiday homes when they are not genuinely available for rent.

Other common errors include:

  • The failure to undertake a physical inspection of the investment property when preparing a tax depreciation report.
  • Claiming rental deductions for properties not genuinely available for rent.
  • Incorrectly claiming deductions for properties only available for rent part of the year such as a holiday home,
  • Incorrectly claiming structural improvement costs as repairs when they are capital works deductions, such as re-modelling a bathroom or building a pergola, and overstating deduction claims for the interest on loans taken out to purchase, renovate or maintain a rental property.

The ATO has signalled that it is now paying special attention to the more than 2.1 million taxpayers who own an investment property and are claiming $47.4 billion in deductions against $44.1 billion in reported income

This audit should act as a warning to tax payers planning to make property claims for the 2018/2019 financial year in the coming months.

Property investors should use the services of a professional tax accountant to help minimize mistakes when lodging their tax claim as the penalties for wrongly claiming tax deductions can be very high.

They should also use other professional services such as engaging the services of quantity surveyor company that is compliant with ATO guidelines.

For example, it is critical that the quantity surveyor company undertakes an onsite inspection of the investment property when preparing a tax depreciation report.

This report is a 'once off' and will outline the amount of tax benefits you can claim on an annual basis. Anyone considering employing a tax depreciation company should ensure that they are a member of the Australian Institute of Quantity Surveyors (AIQS).

Unfortunately, a growing number of tax deprecation companies are not undertaking physical inspection of properties to cut costs and this failure could result in serious problems for their clients if they are audited.

Obtaining a tax depreciation report that is compliant with ATO guidelines is a small price to be paid that will give investors peace of mind while at the same time deliver a significant cash flow boost that can be as much as 60% of the purchase price of the investment property.

Mortgage Lending Growth Sinks to Four-Year Low

By Charbel Kadib 06:50 AM, 1 May 2019 4 minute read

Source: The Adviser

Weakness in the residential lending space has persisted, with subdued investor activity continuing to serve as a drag on credit growth, new RBA data has revealed.

The latest Financial Aggregates data from the Reserve Bank of Australia (RBA) has reported housing credit growth of 0.2 per cent in the month ending 31 March 2019, down from 0.3 per cent growth in the previous month.

Housing credit grew 4 per cent in the 12 months to 31 March 2019, down from 6.1 per cent growth in the previous corresponding period.

Reflecting on the data, ANZ Research noted that the annual rate of housing credit growth was the slowest in four years.

The search groups stated that the weakness was primarily driven by flat investor lending activity.

"Housing credit growth remains soft, with investor finance growth flat for the second straight month, while owner-occupier finance continues to grow well below its recent historical average," ANZ observed.

"The housing credit impulse fell further in March, consistent with further declines in house prices."

ANZ Research expects subdued housing credit activity to persist.

"We expect housing credit to continue to be weak, as tighter credit conditions (which led to the decline in house prices) pass through the system," the research agency added.

However, business credit volumes improved both on a monthly and annual basis, with volumes rising by 0.5 per cent month-on-month (up from 0.3 per cent in February), and 4.9 per cent year-on-year (up from 4 per cent).

Personal finance volumes remained in negative territory, declining by 0.3 per cent on a monthly basis (0.1 per cent in February) and by 2.8 per cent in the 12 months to 31 March 2019 (down from 1.1 per cent).

Total credit growth remained stable month-on-month at 0.3 per cent but fell from 5 per cent in the 12 months to 31 March 2018 to 3.9 per cent in the year ending 31 March 2019.

ANZ's mortgage book falls $1.9 billion in March quarter

The release of the RBA's data coincided with the publication of the Australian Prudential Regulation Authority's (APRA) latest monthly banking statistics.

According to the prudential regulator's data, ANZ's mortgage book contracted by $800 million in March, following on from declines of $400 million in February and $700 million in January.

Since the turn of the year, ANZ's mortgage book has declined by a total of $1.9 billion, from $258.7 billion as at 31 December 2018 to $256.8 billion as at 31 March 2019.

The sharp fall has been mostly driven by a decline in investor lending, with the major bank's investment portfolio dropping by $1.3 billion over the past quarter, from $79.7 billion to $78.4 billion.

ANZ's owner-occupied book also fell sharply ($600 million) - albeit less pronounced than the reduction in investor lending - slipping from $179 billion as at 31 December 2018 to $178.4 billion.

ANZ CEO Shayne Elliott has acknowledged that credit tightening measures imposed by the lender off the back of scrutiny were "overly conservative".

In March, Mr Elliott also told the House of Representatives' standing committee on economics that, in his view, tighter lending standards triggered the overall downturn in the credit market.

The major bank will release its 2019 half year financial results (HY19) later today, which is expected to shed further light on ANZ's mortgage market performance.

CBA still leading the pack

The latest APRA data has also revealed that the Commonwealth Bank of Australia (CBA) and its subsidiary Bankwest continue to outperform their major competitors in the home lending space.

CBA's mortgage portfolio increased by $1.2 billion in March, from $428.6 billion to $429.8 billion, solely driven by growth in its owner-occupied book ($296.9 billion), while its investor portfolio remained stable at $132.9 billion.

Over the past quarter, CBA's mortgage book has risen by $2.8 billion, from $427 billion as at 31 December 2018.

Westpac and its subsidiaries (St.George Bank, Bank of Melbourne, and BankSA) also reported strong portfolio growth in March, with the group's book increasing by $700 million, from $413.8 billion to $414.5 billion.

Like CBA, Westpac's growth was solely driven by an increase in its owner-occupied book ($262.2 billion), with its investor portfolio remaining stable at $152.3 billion.

Over the three months to 31 March 2019, Westpac's total portfolio rose by $1.4 billion, from $413.1 billion as at 31 December 2018.

NAB reported mixed results in March, with a $100 million increase in its owner-occupied book ($155.8 billion) offset by a $300 million decline in its investor lending portfolio ($105.3 million).

NAB reported a net month-on-month decrease of $200 million in its total mortgage book, which fell from $261.3 billion to $261.1 billion.

However, over the past quarter, NAB's total mortgage portfolio increased by $500 million, from $260.6 billion as at 31 March 2018.

ING Hikes Commercial Rates

By Charbel Kadib 06:45 AM, 1 May 2019 2 minute read

Source: The Adviser

The non-major has repriced its variable rate commercial loans, increasing rates by up to 30 basis points.

ING has announced commercial carriable rate increases for both new and existing customers, effective from 1 May 2019.

Variable rates have increased by 15 bps for all existing borrowers with commercial loans.

For new business, the lender has announced the following changes:

  • Commercial loans with a value of less than $500,0000 have increased by 30bps to 5.59 per cent
  • Commercial loans with a value of between $500,000 and $750,000 have increased by 30bps to 5.35 per cent
  • Commercial loans with a value of between $750,000 and $1 million have increased by 20bps to 5.09 per cent
  • Commercial loans with a value of between $1 million and $3 million have increased by 10bps to 4.79 per cent

When asked what motivated the changes, an ING spokesperson told The Adviser: "The nature of a variable rate is that it is subject to change.

"We review our rates regularly to ensure we can continue to be best placed to provide our customers with simple, effective banking products."

ING's rate changes are the latest among a suite of updates to its product suite.

Last month, ING also announced that it would accept residential property as security against a business loan to a maximum loan-to-value ratio (LVR) of up to 75 per cent, up from 20 per cent.

This followed its decision to no longer accept residential property as security for residential loan applications being used for business purposes.

Additionally, the non-major recently cut its fixed mortgage rates by up to 19 bps across both owner-occupied and investment loans.

The fixed rate reductions came a month after ING dropped variable mortgage rates by up to 40bps across its Mortgage Simplifier products.

Australia's Dwelling Values Fall Half A Percent In April As Rate Of Decline Continues To Ease

Source: Corelogic

Dwelling values across Australia continued their downward trajectory in April, falling by half a percent over the month to be down -7.2% over the past twelve months and -7.9% lower since peaking in September 2017. Although housing values are broadly trending lower, the rate of decline has been easing since moving through a monthly low point in December last year when national dwelling values fell -1.1%.

According to CoreLogic head of research Tim Lawless, "The improvement in the rate of decline is attributable to an easing in the market downturn across Sydney and Melbourne where values were previously falling much faster. In December last year, Sydney dwelling values were down -1.8%, with the pace of month-on-month falls progressively moderating back to -0.7% in April. Similarly, Melbourne values were down -1.5% in December, with the rate of decline improving to -0.6% in April. "

Other property market insights supporting a subtle improvement in housing market conditions include a rise in mortgage related valuations activity (as indicated by CoreLogic platform data), an improvement in ABS household finance data for February, and the fact that auction clearance rates are holding around the mid-50% range across the major auction markets. Tim Lawless said, "While none of these indicators could be described as strong, the current trend in the data implies that housing market conditions may have moved through the worst of the downturn."

In April, dwelling values fell across every capital city apart from Canberra, while regional areas of Tasmania, Victoria and South Australia also avoided a fall. The broad-based nature of lower housing values highlights that while the rate of decline has eased, the geographic scope of lower dwelling values remains broad.

Values were down by -0.9% in Hobart, signaling a weakening across what has been one of the strongest capital city markets for value gains and leaving Canberra as the only capital city where dwelling values were up over the month.

Annually, national dwelling values were down -7.2%; the largest annual fall since the twelve months ending February 2009, which was associated with the Global Financial Crisis.

Across the capital cities, Sydney (-10.9%) and Melbourne (-10.0%) are both now recording double-digit annual declines, followed by Perth (-8.3%) and Darwin (-7.1%). The largest gains are in Hobart (+3.8%) and Canberra (+2.5%), while Adelaide is the only other capital city to remain in the black over the past twelve months (+0.3%).


Download a copy of the latest CoreLogic Hedonic Home Value Index Results.

RBA Weighs Alternatives to a Cut

There are several reasons why this more targeted approach to supporting the weakest component of the Australian economy may be preferred to an outright cut.

By Christopher Joye Apr 29, 2019 -- 2.24pm
Source: Australian Financial Review

Industry participants believe the central bank and banking regulator are considering a targeted alternative to a cut to the official cash rate, which would involve lowering the minimum 7.25 per cent interest rate banks use when assessing a home loan borrower's repayment capacity by 50 basis points to 6.75 per cent.

This would improve the average home buyer's borrowing capacity by more than 5 per cent and increase demand in the weak housing market, which was a key driver of the low March quarter inflation numbers (newly built house price inflation declined by 0.2 per cent while rental inflation was very soft at 0.1 per cent).

In December 2014 the Australian Prudential Regulation Authority (APRA) introduced the minimum 7 per cent interest rate on all home loan serviceability tests as a part of its suite of "macro-prudential" constraints to cool ebullient housing activity, which ultimately precipitated the correction that commenced in late 2017.

According to mortgage brokers, more than 90 per cent of banks apply a further 0.25 per cent buffer to this minimum benchmark.

With Australia's 10-year government bond yield only 1.8 per cent, financial markets are not pricing in any material RBA rate hikes for a decade (this yield proxies the average RBA cash rate over the next 10 years plus a term premium to compensate for interest rate volatility).

The average discounted new home loan rate in Australia has been just 4.5 per cent since the RBA's last interest rate cut in August 2016 with many borrowers paying as little as 3.4 per cent today.

A standard two percentage point buffer above contemporary discounted home loan rates implies that a prudent serviceability test could be carried out at a much lower 6 per cent level, well below the 7.25 per cent level assumed by most lenders.

Mortgage brokers say that reducing the minimum serviceability rate from 7.25 per cent to 6.75 per cent would boost the maximum borrowing capacity of a two-income household earning gross wages of $160,000 annually from $870,000 today to $915,000.

There are several reasons why this more targeted approach to supporting the weakest component of the Australian economy may be preferred to an outright cut to the Reserve Bank of Australia's cash rate.

First, the federal budget is now in surplus on all key measures and there are good grounds for policymakers to assume that fiscal rather than monetary policy is better placed to provide any extra stimulus, especially when the latter is approaching its conventional limits. Inevitable pork-barrelling as part of the looming election further reinforces the case for the RBA to wait and see what role fiscal policy has to play.

Second, commodity prices remain very high, and notably above Treasury's conservative budget assumptions, which means the budget will likely continue to deliver larger surpluses than are presently expected.

Third, recent economic data out of the US has surprised on the positive side with first quarter GDP growth of 3.2 per cent (annualised) beating all forecasts (consensus was much lower at 2.0 per cent). It is likely that once presidents Trump and Xi agree on a trade deal, global growth will rebound after a period where it has been stymied by tariffs and the trade impasse between the world's two largest economies.

Fourth, if the RBA cuts its cash rate further below the current record 1.5 per cent low, it will fundamentally undermine deposit-takers' net interest margins, which could threaten financial stability at a time where banks' returns on equity face a multiplicity of headwinds. The interest margins banks realise on their transaction accounts, which normally charge no interest, are constrained by a 0 per cent lower bound. Put differently, it is unlikely that banks will start charging negative interest rates on these accounts to preserve the spread between the cost of sourcing funding via these deposits and the interest rates banks earn on their loans.

Finally, there is an argument that the RBA should preserve its monetary policy ammunition - and further cuts to borrowing rates that are already at historical lows - for a time when the Australian economic faces a real crisis, such as a long overdue recession.

RBA Rate Cut A Matter of When, Not If

The RBA governor will almost certainly cut interest rates in the next few months, but lacks an opportunity to fully "tee up" the financial markets and public to flag a May rate reduction.

John Kehoe Senior Reporter Apr 29, 2019 -- 12.27pm
Source: Australian Financial Review

Philip Lowe faces a communication conundrum in determining whether to cut interest rates during the federal election campaign next week.

The Reserve Bank of Australia governor will almost certainly cut interest rates in the next few months, but lacks an opportunity to fully "tee up" financial markets and publicly flag an imminent rate cut before the next rates decision on May 7.

The RBA prefers to signal a looming change in monetary policy to avoid surprising financial markets which play an important role in helping the central bank achieve its overnight cash rate target.

If market pricing remains below 50 per cent for a May rate cut and given it would be politically controversial to reduce rates during the election, Lowe and the RBA board could opt to defer a monetary easing to June or July.

But if interest rate traders become convinced between now and next Tuesday that the RBA will cut rates next week, Lowe could feel more comfortable that people are ready.

A rate cut would not be a major shock following very weak inflation figures last week.

Yet the central bank's latest guidance was an easing would be warranted only if inflation persisted below the 2-3 per cent target and unemployment rose.

"Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances," the RBA's April board meeting minutes said.

Wild card

The jobless rate is a low 5 per cent and employment growth has been solid.

An imminent rate cut would jar against the RBA's latest public commentary.

The wild card is that inflation is materially lower than the RBA envisaged.

Underlying annual inflation eased in the March quarter to 1.6 per cent, undermining the RBA's forecast that it will reach 2 per cent by late 2019.

Housing, both through lower rents and discounts on new dwelling prices, is weighing down inflation.

Those disinflationary forces will persist, bolstering the case for a rate cut.

Lowe's optimistic narrative that stronger employment will lead to wage pressures and boost inflation is breaking down.

While wages growth has picked up a bit to a modest 2.3 per cent, it has failed to flow through to higher inflation.

The weak inflation confirms global disinflationary forces - driven by competition from globalisation and technology - are entrenched in Australia.

Ironically, federal and state governments are pushing down inflation by responding to perceived cost of living pressures, via subsidies for childcare, schooling and electricity.

Ideally, the RBA would undoubtedly prefer fiscal policy to play a larger role in supporting the economy and inflation, to avoid cutting the already record low 1.5 per cent cash rate and approaching the risky zero interest rates.

While both sides are offering mild income tax relief for low-to-middle income earners, the rebates of up to $1080 per worker will not be paid until after tax returns are processed - around September.

The RBA probably feels it can't wait that long for that useful fiscal boost.

Neither side of politics is prepared to seize on incredibly low borrowing costs to significantly ramp up investment in productive infrastructure, as suggested by former RBA board member Warwick McKibbin and ex-Treasury official Peter Downes.

The Coalition is committed to an underlying cash surplus in 2019-20.

Labor is aiming for "bigger budget buffers" through $387 billion in higher taxes over a decade, notwithstanding its spendathon on childcare subsidies and wages, dental care for pensioners and cancer treatment.

RBA governor Philip Lowe faces a communication conundrum on the next rate move. AFR

Fiscal policy, in net terms, looks likely to continue to tighten mildly.

So the RBA may reluctantly feel it has to step in to counter weak inflation.

Over the past decade, the RBA has often cut rates in May and began easing cycles immediately after a quarterly inflation figure.

It cut rates during the 2013 election when Lowe was deputy governor and raised borrowing costs in the 2007 campaign.

It will be mindful that commercial bank funding costs have dropped significantly in recent months, so there would be no justification for banks not to fully pass through any rate cut.

The big decision for Lowe, a modest character who does not seek the limelight, is whether to insert the RBA into the election fray or publicly set up a rate cut for future months.