Fixed Rates 2.09% and variable rates as low as 2.59%

While Covid19 continues to plague our lives, especially in Melbourne, it is very hard to predict what is going to happen to the housing market. We have been in stage 4 lockdown for three weeks now and while we are seeing a decrease in virus numbers, home purchases have all but come to a standstill due to no auctions or inspections being allowed. 

We have noticed a lot of our clients have got pre approvals in place ready for the market to open back up and expect things to pick up as soon as this happens.

The silver lining with everything coming to a standstill is that it is a really good time to organise that refinance you have been putting off. Refinancing is an option the RBA has urged homeowners to consider to get a better deal during the pandemic. Even Reserve Bank of Australia’s governor Philip Lowe came out and said “I encourage people who haven’t already taken up the opportunity to do that to look at their mortgage rate and look for a better deal.”

If you have an existing loan and haven’t looked at it for a number of years, now is a great time to look into moving. Interest rates are at all time lows and banks are still offering cash back up to $3,000 for refinancing to them. We are refinancing clients at the minute into new loans with interest rates as low as 2.09% fixed. This could end up saving you thousands of dollars a year.

As the refinance market can get confusing with online banks special deals which may not suit everyone, it is important you speak to a lending specialist who can simplify things and ensure you have the right product and structure to suit your unique situation. Please reach out to us if you would like to explore your options, we would love to help you save some money in these hard times.

Economic and Market Commentary

We are now well into the third quarter of 2020, with strict lock downs in Victoria, NSW putting out cluster spot-fires and countries all over the world battling second waves.  To date, Australia has had relatively good health and economic outcomes throughout the pandemic.  However, the ongoing outbreak in Victoria has demonstrated we will likely be living with the virus and the associated restrictions for the foreseeable future.

What does this mean for our markets?

Following the initial fall in March, the Australian share market has seen a surprising bounce back and a steadying in prices.  It seems the enormous amount of stimulus provided by the government is propping up the markets for the time being.  We remain watchful of the unfolding situation and government response to manage the health crisis, economic crisis and potential monetary crisis.  In the near term we will likely see further volatility as we approach the US elections, the outcome of which will affect US and international markets.  In the long term, we believe Australian and international markets are well positioned for a steady recovery and continue to offer better returns than the cash and bond market due to near zero interest rates.  Some other areas we are observing with interest are discussed below.

It would appear everything good is gold during this period of uncertainty.  Investors have been buying up anything gold, pushing the price up to over AUD$2,850 per ounce.  Historically, gold has been seen as an investor’s safe haven, particularly in times of market volatility or when inflation is expected to gather pace.  There is no doubt we have significant market volatility right now but in the current climate of significant unemployment, no certainty as to when the economy will get going again and therefore demand for products and services to drive up inflation and interest rates expected to be low for quite some time, we do not see inflation on the near term horizon.  We are not saying gold shouldn’t form part of a diversified portfolio but make sure that you are getting your exposure through appropriate investment channels.  For example, if you are looking for income to be produced from your portfolio, a gold bar sitting in a bank vault won’t deliver that.

With the lock downs in place, not only have we become even more reliant on technology but new technology opportunities are being created.  As we all continue to adapt to life apart, our virtual world is expanding with virtual work meetings, virtual Friday night drinks, house inspections, dinner parties, music and art events and on a grimmer note, even virtual funerals.
With retailers’ doors closed, they have been forced online and one of the big benefactor of that has been the Canadian based company, Shopify, which provides a very easily customized online store.  We understand a good programmer can have an online store up and running in a couple of hours using the platform.  Not surprisingly their share price has gone crazy in the last 6 months from around $320 to $1,000.

The expansion of our virtual world has inflated, even further, the profits of tech giants.  The three key players, Apple, Microsoft and Amazon all reporting revenues well above expectations of US$59.7, $35 and $88.9 billion respectively. It is this boom in revenues for tech sector companies which has seen the US market, which is heavily weighted to these sectors, outperform during this period.  As the world finds it feet and other sectors such as manufacturing and financials will benefit and likely gain ground on US market performance.

 To date, the industry is relatively unregulated as it does not quite come under the National Consumer Credit Protection Act.  History has shown us the result of easy credit with little to no security and lax regulation, we are also yet to see the ability of this sector to withstand a large volume of payment defaults.  If unemployment continues to rise and spending contracts, we could soon find out.  Again we are not saying don’t have one of these stocks in your portfolio but understand the risks and the drivers before you buy.

So, as we approach September and the winding down of government support, we expect investment markets to continue to be volatile in the near term. However, with appropriate positioning and diversification we remain optimistic about market outlooks.  It is important to remember while we have never seen circumstances like this before, we have learned a lot from past economic shocks.  Our key take away is to stick the course and remain confident in well-rounded, long-term investment strategies.

Our last area of interest is a relatively new one, the Buy-Now-Pay-Later (BNPL) sector.  This payment product, offering a lay-buy style payment plan in which you get your product on day one, has taken the market by storm.  Its estimated that one in three Australians 15 years or over have a BNPL account.   With credit card balances plummeting, down 21% in the past 12 months, it would seem that BNPL is the new answer to consumers personal credit requirements.  While the key players, Afterpay and Zip, have produced good share price returns to date we are intrigued to see how these providers would withstand a pullback in spending and when they will actually make a profit.

Commercial Finance

We wanted to touch on how we can assist your cash flow, as all business owners know Cash Flow is King.

It’s vital that you have access to capital, ideally unsecured and away from your bank.

A overdraft/line of credit allows you to have capital sitting there that can be quickly utilised for a number of different scenario’s. You can also pay it back when you like which will mean limited interest is charged.

One of our fintech lenders specialises is unsecured overdrafts, key points below.