Australian houses are still relatively affordable, even though prices have grown faster than those in other major economies, says credit ratings agency Fitch. The Fitch Global and Housing Outlook Report says that in 2014 Australian prices are forecast to outstrip even countries recovering from the GFC. But Australian houses continue to be relatively affordable, thanks to low interest rates and high incomes with only modest employment declines. Fitch says Australian house prices have more than tripled since 1997. Even though prices fell 4% between 2011 and mid-2013, they stayed above those of the UK, our nearest rival. The Sydney Morning Herald reported that house prices compared to per capita GDP are the world's second most favourable.

People often focus on interest rate when shopping for a loan but there are a range of fees a lender may charge that can make that oh so low rate not so great.

Application fees
Most lenders will charge some form of application fee or establishment fee to set up the loan. This can vary from lender to lender but is usually around the $600 mark. This is an area where you need to exercise a bit of caution. For some lenders this will be an all up fee covering loan set up, valuation, and legals, but for others it will be one of a range of other fees. So it’s worth having a close look over a lenders complete list of charges so you know the total cost you are up for.

A number of lenders will promote no application fee, but will then charge for valuations and settlement that can end up costing more than $600.

IMPORTANT NOTE – I often come across people who get very hung up on paying fees particularly application fees. Certainly you don’t want to pay more than you have to but your priority should be selecting the right loan and structure. Basing your decision on a $600 fee when you are planning to borrow a couple hundred thousand dollars is fairly short-sighted given that making the wrong selection could cost you thousands.

Valuation fees
Many lenders will include one valuation as part of their application fee. They may however, charge additional fees for, additional properties, properties over a certain value, properties in certain locations, and properties that are unique in some way. Again some lenders will have this as an additional charge to their application fee.

Legal/document fees
Some lenders may charge a separate fee for preparation of loan documents, particularly if they are outsourcing their legal work. This can vary from a few hundred dollars to over $1,000.

Settlement fees
Most lenders will charge an additional fee to attend settlement, of around $100. If there is more than one settlement involved then you will be charged for each settlement.

Lenders mortgage insurance (LMI)
The amount charged is based on both the amount borrowed and the LVR, and can range between 0.5 to 3.0% or more, of the loan amount. Importantly mortgage insurance can vary greatly from lender to lender. Again you might get a great rate but the a higher premium might actually see your real rate being much higher.

Service fees
Lenders may charge ongoing service fees. This could range from $8 a month up to $400-$500 a year

Offset fees
Some lenders will charge extra to set up an offset account and may also charge an ongoing fee for this facility

Switching fees
If you want to change your loan down the track like switching from variable to fixed your lender may charge a switch fee which could be %500 - $600.

Get advice
Just another reason why it's important to have your situation properly assessed. Contact us to discuss your home loan requirements or a for a review of your current lending.

Businesses expect a better trading year in 2014 amid strong profits and a reduction in operating costs.

The Commonwealth Bank future business index, which gauges the sentiment of mid-size businesses with a turnover of $10 million to $100 million, suggests businesses are experiencing a sharp increase in confidence.

The index was 17 points in the December quarter, its highest level since the survey began in September 2011, and up from 10.8 points in the previous three months.

"The vast majority of businesses are anticipating a more prosperous year ahead," said the bank's general manager for corporate financial services, Michael Cant, when the report was released on Thursday.

"Notwithstanding the buoyant sentiment .... there remains a level of conservatism as businesses continue to focus on managing costs."

The survey found the top three challenges facing business are weak consumer confidence, a falling Australian dollar and uncertainty about government policy decisions.

There are also increasing concerns about skills shortages.

However, 77 per cent of organisations expect a better performance in 2014 compared with 2013.

The survey's revenue index for the next six months jumped to 41 points in the December quarter from 25 in the September quarter, the profit forecasts index increased to 27 from 15, and the operating costs index eased to 29 from 33.

Commonwealth Bank chief economist Michael Blythe said the sharp improvement in revenue and profit expectations was quite encouraging.

"We're seeing this improved sentiment flow through to other important areas, such as an enhanced appetite for risk and an expected increase in capital expenditure and headcount," he said.

Two out of three Australian businesses are more optimistic about growth this year compared to 2013. Dun & Bradstreet's Business Expectations Survey shows that 68% of respondents expect positive sales, profits, selling prices, investment and employment. The survey found that 18% of businesses are planning to access new finance during the first quarter, the highest response since the last quarter of 2011.Thirteen percent of businesses plan to increase capital spending, compared to 5% who will decrease spending. Hiring plans have also strengthened, with 15% of businesses intending to take on more staff, taking D&B's employment index to a three-year high of 8.8 points.

Monthly home loan approvals reached the highest level in four years in November. The Australian Bureau of Statistics (ABS) says there were more home loan approvals in November 2013 than any other month in the past four years. The resource-rich states of Queensland and Western Australia approved 15% and 12% more home loans respectively than the same time last year.  

Brisbanites will have access to an innovative double decker public transport tunnel which will accommodate both rail and busway services under the new “UBAT” (underground busway and train) tunnel. The project is budgeted at $5 billion, around $3 billion less than previous Cross River Rail proposal.

Premier Campbell Newman announced the Underground Bus and Train project, a 5.4 kilometre tunnel with two train lines in the lower section and two busway lanes in the upper section.

“We’ve taken two of Brisbane’s major congestion challenges – the Merivale train bridge and the Cultural Centre bus precinct – and come up with an affordable and elegant solution.

“The project we are announcing today delivers the public transport services needed for the next 50 years.

“A single 15-metre-wide tunnel will be built, requiring the largest borer ever used in Australia – almost two metres wider than the Clem7 and Airport Link tunnels.”

Mr Newman said a public competition would be held early in the New Year to come up with a name for the project.

Lobby group Rail Back on Track described the UBAT plan as exciting and welcome news, but spokesperson Robert Dow said it must be constructed with future capacity demands in mind.

Spending is set to lift across the Australian economy this year, after healthy and sustainable growth continued during December, according to new research released today.

The Commonwealth Bank Business Sales Index (BSI), which tracks the value of credit and debit card transactions processed by Commonwealth Bank, saw spending rise by a seasonally adjusted 0.4% in December, bringing annual growth for 2013 to 10.6%.

Seasonally adjusted data excludes certain seasonal factors to give a more accurate month to month comparison.

“The spending increase in 2013 has provided a strong foundation for further increases in 2014,” said CommSec economist, Savanth Sebastian.

“The housing recovery continues to gather momentum, while rising wealth levels, low interest rates and a recovering share market is supporting consumer confidence and in turn spending.

“The lower Australian dollar should also provide a boost to exports in coming months and help to alleviate the risks surrounding the rebalancing of the economy. “

Just as lenders have different views on how income is treated, the same applies to expense. 

Household expenses
Each lender will have its own method for estimating your general living expenses based on factors including the number of adults, number of dependents and number of vehicles. The higher any of these variables, the higher your calculated living expenses and therefore the less you will be able to borrow.

Loans with other lenders
If you will continue to have loans with other lenders (as might be the case if you have investment property) then these will be recorded in your commitments. Be aware that many lenders will place a loading on other bank commitments above their standard variable rate. Also they will calculate the repayments based on the loan being fully amortised.

The net result of this approach is that it makes your loan repayments appear much higher than they really are. This can have quite a significant impact for property investors with several properties who want to keep building their portfolio. It is not unusual for property investors to hit a road block with their lender because they can not pass their serviceability test – even though they clearly have sufficient capacity to fund additional properties.

There are however some lenders that wil asess other bank loans at their actual repayment which can significantly increase your boorowing capacity.

Joint loans
Let’s say for example you bought a property jointly with a friend 12 months ago for investment. The loan for the property is $400,000 and the property rents out for $400 a week. And now you want to buy a home with your partner and need a new loan of $400,000.

Your loan commitments will be based on total loan commitments of $800,000, not $600,000 (New loan $400000 plus half of investment loan)  as many people expect. This is because as a party to the loan you are jointly and severally responsible for the debt. For example if your friend got injured and couldn’t make their share of the loan repayments you would have to make the repayments or risk losing the property. Therefore the full $400,000 will be recorded as your commitment.

To make matters worse only half the rent can be used as your income as this is all you are legally entitled to.

Aside from the other issues and risks that can be associated with joint ventures it is worth considering how it will impact on your future plans.

Guarantees
Much the same rules apply as above. If you go guarantor for someone else you are jointly and severally liable for the loan. As such the full loan amount will be recorded as your commitment.

Credit card and personal loans
Credit cards, personal loans, store cards, and products bought on interest free, all impact on your borrowing capacity. Credit cards in particular can have a significant impact. Whether you are using the card or not, or even if you are clearing the balance each month, lenders will still record the limit as a commitment.

So if you have a card with a limit of $20,000, most lenders will view this as a $600 a month loan commitment. 

Rent
If you intend to continue renting after you obtain the home loan this will be added to your expenses. Exceptions to this would be if you are only renting for a short period. As might be the case if a lease was continuing for a number of months on a property you had purchased.

Child maintenance
If you are required to pay child maintenance on an ongoing basis then this would be included in your expense. The lender will also want to see any court ordered or settlement agreement to see what other expenses you may be responsible for like school fees.

In a number of the above situations some lenders will assess aspects differently which will be more favourable to your borrowing capacity which is why is important to have your situation propertly asessed by a broker. If you only talk to one lender you will be limited to their policies.

Contact us to discuss your home loan requirements or a for a review of your current lending.

This Boutique apartment complex has come up on our radar.

• 6 km to CBD
• Bus stop right out front
• Train 200m
• School 550m
• Shopping Centre 800m
• Expected gross yields approx 5.1%
• Low body corps

The units are complete

What opportunities are you missing?
Are there ways to improve your current cashflow that you are not currently doing? Are your finances correctly structured to build a property portfolio or are they holding you back? Do you have a plan of attack of how to build a portfolio? Are your finances set up to ensure you can acquire property without negatively impacting your lifestyle? Are there things you are missing that you should or could be doing that could have a significant impact on your wealth creation plans?

Contact us for an initial discussion.

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Raine & Horne are tipping 7% plus growth for Brisbane in the coming year.