December 2005 Newsletter 

In this issue:

• Australian expats can now borrow up to 95% of the property value

• Recent testimonials

• What experts have to say about the property market next year

• Fixed rate loans – pros and cons

The great news is that 95% lending is now available for Australian expatriates. This means that you can now buy a property in Australia with as little as 5% deposit plus the purchase costs (stamp duties, legal fees, insurance and government charges). Standard qualifying criteria applies. Contact us for more information.

Recent testimonials

Anton,

Thanks for all your help with my refinance. I guess everyone is a little wary about dealing with people based on a web presence only, but I can say to all your prospective clients that I have found your service to be very thorough, extremely prompt, and totally professional at all times.

Thanks again for all your help.

I would be more than happy to recommend you to friends/colleagues looking to refinance Australian loans, or to have this message listed on your website as a testimonial.

Cheers regards

Neil

Auckland

December 2005

Genuine support,

Recently, my wife and I decided on commercial property investment as a keystone to our retirement planning.

We contacted Properfinance to discuss the financing options available to us and from the outset we were greeted with competitive packages and importantly, quality advice that was clear and cognizant of our circumstance as expatriates.

Even whilst I was in the remotest parts of Cambodia , Properfinance maintained timely communications; lending support to both finance and real estate negotiations.

We strongly recommend, Properfinance to any expatriate seeking competitive finance and quality support.

Brian and Ann

Cambodia

November 2005

Experts talking about the property market next year

KPMG Property analyst

Bernard Salt

“If the cycle theory is correct then there will be a property upswing beginning in Sydney in 2006 or 2007 before spreading to other parts of the nation. This would place the next cycle as running from, say 2007 to a peak in about 2011.”

Wakelin Property Services cofounder

Monique Wakelin

“It will be steady as she goes for the next 12 to 18 months or so and then we will see a moderate upturn.”

Macquarie Bank head of

property research Rod

Cornish

“We expect moderate capital city price movements over the next 18months with continued price drops in weak sectors such as generic investment apartments in oversupplied locations.”

BIS Shrapnel senior property

analyst Angie Zigomanis

“We expect strong economic growth to maintain stable prices over the next 12 months, with prices expected to weaken in the medium term as higher interest rates impact on affordability.”

Page 6, Investor, The Age, Sunday

August 7, 2005.

Discussion about the fixed rate mortgages

Almost every lender offers fixed rate loans within their range of products. Whilst fixed rate loans offer fixed repayments and predictability for a certain period of time, there are a number of limitations to consider.

A mortgage with a rate fixed for 2, 3 or 5 years will be easier to build your plans on. You can always switch into a fixed product by making a request to your bank. The downside of this type of finance is the lack of flexibility. Most lenders will charge penalties if you try to break the fixed contract by switching to a different product, refinancing to another institution or selling the property. Banks usually limit the amount of extra repayments you can make on a fixed mortgage. This will not suit those who would like to pay out their property as soon as possible. In summary, the certainty this type of mortgage provides comes at a price of inflexibility.

A split loan with fixed and variable portions is a good alternative when you want to combine the certainty of a fixed rate and the flexibility of a variable rate. However, it is still possible to find a lender who allows unlimited extra repayments on a fixed rate mortgage.

Is it a good time to fix? Many of our clients ask this question.

To find the answer, we have to look at how banks set their fixed rates. Banks have a team of economists who analyse and predict upcoming changes to GDP, inflation, unemployment, exports, exchange rates, and interest rates. The forecast of the official interest rate set by RBA and future home loan rates is used as a benchmark for setting up fixed rates for mortgages.

Consider a 3-year fixed home loan rate. Is it likely to be below or above the average predicted variable rate in the following 3 years? The answer is 'ABOVE'. Why? Because if it was below, the bank would be more likely to lose money on the 3-year fixed loan. Banks expect to make more money on a fixed rate than on a variable and set the fixed rates accordingly.

Many of us have heard stories about jumping into a fixed rate at the right time and, in the end, paying less than those on variable mortgages. This happens when banks misjudge interest movements. For example, in March 2002 banks expected official rates to go down due to the falling GDP and weakening stock market. They set fixed rates below the prevailing variable rates. However, the official rates have since risen from 4.75% to 5.50%. Those who fixed in March 2002 were lucky.

But how often do banks make mistakes favouring their customers? Unfortunately for us, banks are more likely to win the game. For this particular reason, we strongly recommend to our customers not to attempt to predict interest rate movements to decide whether to choose a fixed rate mortgage. The decision for or against can be based on your risk profile. It can be compared to, say, home insurance. If something happens to your house, it will be rebuilt at the expense of the insurer. In a similar way, fixed rate loans offer security, but come at higher price and are less flexible.

Disclaimer 

The purpose of this publication is to inform about choices available on the mortgage market and does take into consideration your personal situation and requirements. Under no circumstances, this material constitutes advice, and you should not treat it as advice. If you need professional financial advice, please contact your financial adviser or chose one from Australian Financial Planning Association.

In the next newsletter

• Buyers agent and how they can help overseas customers.

• Loan features. Which ones do you really use?  

We will be happy to discuss and research various options for your new or existing mortgage in Australia. There are plenty of home loan deals in store for you, simply contact us and send us an enquiry.

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