Well, I was wrong.
It turns out banks and lenders CAN afford to all raise their rates, because there can’t be a PR backlash against individual lenders if the whole industry does it (to see my prediction in last month’s email, click here). Jerks.
After the big 4 increased their rates, ME Bank decided to put its hand in. It didn’t even try to disguise the truth, stating openly that they were wishing to increase their shareholder return. Then followed an avalanche of lenders, all stressing the need to put more in their shareholders’ pockets. So, for those of you with bank shares, you’ve managed to increase the repayments on your home and then have that refunded via a taxed dividend. Congrats! For the rest of you, feel comfortable in the knowledge that your increased monthly repayments are helping to pay someone’s mortgage off, if not yours. How’s that for a lesson in capitalism! It also makes the RBA’s decision yesterday to keep their rates on hold a little hollow.
Perth picks up.
RP Data has run the numbers this month and Perth is up 0.3%, marking the first uptick since last year and possibly ending the 5.9% drop recorded since last year. For those thinking about investment or purchase, now may be the time to start looking. Read the report here.
Finally, have you seen our current Facebook comp? If not, click here to enter and stand above your friends, dolling out favour for those who appease you and justice for those who don’t.
Questions from this month:
My partner and I have $50,000 that we are wanting to use for a home deposit in the next few years. At the moment, it is just sitting in a bank account but we’re wondering whether we could get a higher return elsewhere?
We get this question a lot. The answer depends on two things: your realistic timeframe and your appetite for risk. As everyone knows, a higher risk leads to higher return. An extreme example of this is taking your $50k to the Roulette table and you invest $50k in Red. All investments lie somewhere between stashing your cash under the mattress and the Casino, with return generally commensurate to risk. The thing that places context around this is time. Losing $50k might not mean so much if you can earn that $50k back in a few months. Sounds like a cop-out, but we recommend talking to us. Typically we can suggest anything from keeping it in cash to investing in a lower risk bond. The key is to understand your limits.
We are wanting to set up something for our children for when they are 18. Should we purchase shares? Put it in a bank account?
Firstly, what would you have done if given upwards of $50k when you were 18? Exactly. Raise the limit to at least 25. That way you won’t be contributing for 18 years to a beer fund. Secondly, we commonly recommend Investment Bonds. As a vehicle for passing wealth on, they are hard to beat. They have low entry costs and AMAZING tax incentives including a capital gains tax exemption for keeping them longer than 10 years (try and find that anywhere else!). I have one that we contribute to monthly for our son. It’s a small investment now, but will ensure he gets a great start in the future.
If you have property or financial advice questions, send them through and we’ll answer them!
Until next time,