Ask Adam: Will interest rates rise? What should we do?

Good morning, everyone, and welcome back to another episode of Sugar Mama's Fireplay. I am your host's financial planner, Cannah Campbell, and today we have our number one favorite mortgage broker in the studio this morning, getting to pick his brain and ask all of those very important questions you need to know about the mortgage industry, how to get the monkey off your back, and how to actually use your financial assets to build well. Now, to make sure that we keep as a happy I need to read at

All right, Adam, good morning, how are you?

Good morning, Cannon. I'm well. How are you.

I'm well, I'm well. I actually have something to read out to you. So recently you looked after a friend of mine and going through a bit of a tough time, and she sent me a message and it was a really beautiful message. So I wanted to read this out you.

Hi, darling.

I can't thank you enough for putting me in touch with Adam. It was so nice to finally feel like someone has my back. And he was so patient with me, explaining everything in a non intimidating way. Nothing was too hard. He really is incredible at what he does.

Excellent. I love that. Yeah?

Is that nice?

Yeah? Really good? Thanks for sharing.

All right, I have a lot of questions to ask you, and I really want to get stuck into this straight away. So the most important question that's not only burning on the tip of my tongue as well as everyone else's taking into consideration. Of course, you don't have a crystal ball, but what does your professional and personal intuition and guart think will say is going to happen to interest rates, I should.

Say this year.

Yeah, it's a tough one.

I want to hear what you genuinely think. I don't want to hear what the politically compliant correct.

Right, you have to come down.

Okay, that's the answer I'm looking for. I mean, obviously we're not holding you accountable to that.

Obviously, no, no, And there's many factors that contribute to the decisions RBA make around that. But if you look at all of the conditions, we've had the most interest rate rises over eighteen months in a long period of time. People are struggling, the cost of living is extremely high, inflation is coming down. It's been a bit stubborn over the last you know, maybe four months, but in the whole it's been improving. We had I think there was

So we still have to keep waiting Look, it.

Was hopeful to be sooner than that, and I still wouldn't rule it out because you look, you look at the GDP figures, which I think most recently was point one, and that's on the back of immigration. Really otherwise we're in a recession essentially. Well, I think it's fair to say so. Unemployment is a part of that as well. So yeah, look, watch, watch and wait with the other see what they do. I just I just don't think it's responsible for them to increase again.

Is not sustainable anymore. I mean, people are really living off the scent of an oily rag and now starting to go backwards, and the financial stress and the cost of people's mental health and the burnout. I think that we are now potentially staring down the barrel of like nine hundred and seventy four thousand Australians now have a second or a third job just to get by, right.

That's incredible. Yeah, Look, it's proven to be a blunt instrument the interest rate rises, you know, so many of them are, and it's taken so long to get the inflation on the downward trend. Putting them up again, I just don't see what that will achieve. Yeah, I think it's more about patience and making some responsible decisions around the case rate.

I'm going to ask you a question which I didn't tell you I wanted to ask, but I'm interested to know if you can explain this. Why are interest rates always directed by inflation?

Well? This is beyond my years. You know, I've been a broker for twenty two years and from my knowledge understanding, the target inflation rate band of two to three percent came from New Zealand, I've heard a long time ago. So the number was plucked out of thin air.

Isn't that sad that we're placing so many people under unnecessary financial pressure on this like ambiguous, like they like floating number that really doesn't actually mean anything or actually offer anything that's relevant or accurate necessarily.

Well, the difficulty is that, you know, the inflation and the interest rate of the cash rate increases are impacting a small percentage or a small percentage, but not the whole of the population. It's mortgage holders. So yeah, I think that and the government have probably shown their hands a been in regards to the RBA meetings and making

Jobs now nine hundred and seventy four.

Yeah, so the unemployment figures don't accurately reflect that. I don't believe you.

Don't look, that's awed, like you know, there's just six and damn lies. And actually forty eight percent of Australians are considering, well seriously considering taking up a second job in the next six months. Like, so it's this is a trend that's here to stay. What do we need to know right now about interest rates and our mortgage probably more so our mortgage, Like what's a good rate right now? What are people doing? What are you seeing people use effectively?

A good rate at the moment? Is still that from that six percent to low sixs. You can't can't actively constantly chase the best rate on the market all the time. So if you're in that band, that's good, and then over time you'd like to keep sharpening that, getting closer and closer to the best in the market. But you know, we're looking at fixed rates at the moment. Some banks are providing or some lenders are providing some good one YW rates, so that's something you can.

What it's a good rate fixed one mid to.

High fives, No way, I've seen a few of those. But then you've got other lenders who are high sixers, so.

It is quite a big a gap there is to shop aroundtage to help you.

But those those fixed rates can be manipulated around, you know, the bank or lender's appetite for market share. Really, so those who have a high fixed rate are basically saying, you know, we're not touching this market at the moment, we're happy with our market share, stay away. Whereas whereas the lenders who are providing a lower fix rate, it's another reason to join them. So it means that it gives you some flexibility and takes the pressure off cash flow. That might be something to consider.

Well, what would you recommend then for people right now who are terrified of future interest rate rises and don't trust the RBA and the government.

What's there sort of saying is.

Potential stop reading the news.

Exactly, but it means should people if they're worried, they consider fixing part of their loan, Like, what are you recommending to people you're saying no, we're probably looking at interest rate cuts, like hang in there, you know, and then we can relook at, you know, revisit the idea of fixing some rates. If you're still concerned, like what are your what are your thoughts around this?

It's my opinion rates will come down. It's just a matter of time. So I think with that the best the best thing that you could do as a mortgage holder is check with your lender what their available fixed rates are. If they've got a one year rate that is really considerably lower than your current variable, then look at fixing part of it because it can help you take to take some pressure off in in terms of

No, please don't know that, listeners.

But at the same time we've got to be mindful that some families are really struggling.

Of course, I mean, if it's the last resort, it is the last resort that means you can stay continue on living in the family home.

Of course, we're hearing of families skipping meals, kids going to put all or the parents are giving meals to be able to feed their kids. You're in that situation, then extending a term isn't the worst thing in the world exactly. You know you can catch back up in future when things get better, of course, So they're some of the options that you've got.

Great wise advice. Thank you, Adam. All right.

On that topic of asking for discounts, how often can you call your bank and ask for a discount or a better deal?

Like?

Is it every six months? Is it every month? Like?

Whose schools have thought one? As often as possible annoy them.

I like the idea of annoying my bank because I get really annoyed seeing the interest that I page month on my everyone does.

Look, it's I think you need to be sensible about it. I don't know this for a fact, but I think the more that you ask, the less that you'll get long term. Really, yes, I wouldn't be more than every six to twelve months, you know, once twice a year at a push, I think is probably sensible. I think the banks in their system somehow probably flag how often you're asking a little fun It wouldn't surprise me. I'm not saying it's true, but.

Once twice a year if there's any mortgage not mortgage brocus, but if there's anyone who works for the bank, it happens to know the answer to happen, Please send me a DM.

I'd be intrigued to know.

All right, how often then do you ask on behalf of your clients for a further discount with the.

Banks generally speaking, once or twice a year, unless circumstances change, such as lower loader value ratio with reducing debt or selling property, things like that. When things change, we can ask again because of those changes, and it puts you in a different pricing interest rate bracket. We will Otherwise

That's brilliant.

It's fantastic.

Is that something that you guys do that's quite unique.

I wouldn't say unique. I think more and more brokers are starting to use it because it's a really good service and it's a part of looking after your customers. So but on the whole it's not. I don't think it's widely used, but definitely more and more.

I definitely want AI helping me pay off you.

So look, we love it, Our clients love it. The communication updates around the monthly save monthly or annual savings, when we're getting those rates passed on communicated out three miles. Everyone loves it. So why wouldn't we use it? All? Right?

The other day I saw something in the media and it was about a z bank having these low risk mortgages in affluent areas that can borrow with as little as five percent deposit? Is this true or is it too good to be true and there are some nasty strings attached?

Yeah, it's true.

Really, it's more.

I understand it in a bit of a trial phase, but there are some catches. You know, it's a minimum minimum own size of two million, so then you're looking at I think you know your income to support that would be up around the five hundred thousand mark, So they're targeting the wealthy.

And the top two percent of the coma.

Yeah, and in those affluent suburbs where the property prices are increasing, so the bank's de risking that in that sense, they're waiving them Morgane insurance because you know, if it's east in suburbs of Sydney, well when did the property prices last go down there?

Wow?

That seems so unfair that. You know, essentially, if you're living in an affluent area, you're getting potentially a cheaper interest rate because you're buying borrowing a large amount of money. You can get away without having to pay mortgage insurance, which is exceptionally expensive and a massive waste of money.

Price range a little bit a lot.

Yeah, and like better terms and conditions on your homelane.

Look, I don't I haven't seen the figures. It wouldn't surprise me if the interest rate is inflated.

Okay, alright, that makes me a little bit better, But.

I mean it's inflated interest rate, it's not you know, how many how many people are going to qualify for this? You know, at that two million dollar five and a K family income. But at the same time, we may end up cutting this out. But you know, they wouldn't have got an extamp duty concessions, they'd never be eligible for the first home by our grants. Maybe don't put that in.

No, No, I think it's I think it's really important.

Okay, Well, maybe I'm being a bit sometimes, maybe I'm being a bit pull poppy syndrome.

And look, at the end of the day, the bank are targeting that that they've indicated they want that target market. Yeah, they want their business. Maybe it's because they wanted to do sell them financial products as well insurances. Yeah, so look they can totally and you know, good on, good on whoever qualifies for that and saves all that mortgage insurance, you know that's off to them.

All right.

Well, that then spurs on my next question, and that's really back. It's about the inspiration behind like just desperately

Yes, I think and I've always had this view that mortgage insurance some time time is just a necessary evil. You know, it's an opportunity cost, and you've got to weigh it up. So, if you don't want to pay mortgage insurance, how much longer is it going to take you to save that extra fifteen percent in that period? If it's three years in that period, what did you forego in properly growth?

Yeah, And that's the thing is we can't save as fast as what the property market's doing, and it doesn't look like it's slowing down anytime soon. So unfortunately, as you said it, you have to sort of accept what it is.

I think, get in. Yeah, get in, because as as you wait and try and save more to avoid mortgage insurance, the property market so the price range that you're looking at today could be two hundred thousand dollars more in three years time, you know, would you then fifteen percent target extra that you had wouldn't be enough.

You'd need more again, Yeah, just chasing your tail.

Yeah yeah, And as you said, the property market's a bit of a speeding train, and you know, so just jump on board. I think if you can, if you can get in secure the place that you desire, you and your family, and you're aware of the mortgage insurance costs and you pick it up, you get your house, move on, as you said, target paying it off as quickly as you can, all right.

That then then leads me to my next question for first home owners that just want to get in the market. Are people really using this super Safest scheme? Or is it just like a bit of a hoken offering from the government knowing that really going to use it but it makes them look good.

No, it's good. I've had a number of clients that are using it. Really, you get tax savings as you contribute, so I think it's fifteen thousand per year. You can contribute per applicant, per borrower, and then you can draw I think it's fifty up to fifty thousand and eight at the end of it when you're ready to.

Buy, So potentially you get one hundred thousand dollars deposit tax free.

Wow.

But it's got to be used for purchasing a home, correct, and a home that you move into, correct, not an investment property.

No, that's right.

Are there any other terms and conditions that people need to be aware of?

You can also at the time that you're buying, you can also withdraw the earnings of those funds that you're deposited into SUPER. So you know, if it was in an interest bearing account at ten percent, you can take that back out. Why buy?

And is there do you need to see a mortgage broker that actually specializes in this or do most mortgage brokers do this?

Oh? Look, it's not a mortgage broker, not a mortgage broker product or you know basically basically via your accountant that you need to do that or through your super fun your contributions, and then when you're ready to buy, it's called a determination, So you apply through your super fund or the ATO to get that fund those funds released and go, wow.

Okay, definitely something that's worth considering. But obviously you've got to be so careful then of the damage done to your superannuation. You know, you've got to make sure that you try and rebuild it back up again so that you can eventually one day retire. But at least, as you said, you've got your foot in the door of the market.

Yeah, but you're putting those in as it's part of your savings for your deposit, so and it's a traducing attack, so you can either have your you know, if you've got thousand in your savings account that you're holding for property, you can start putting that into your super as a way of saving on tax and building up a bigger deposit.

I guess it also helps remove temptation to spend it. And belood that's true too, which is you know, a lot of people is a big risk.

All right, Is there anything else we need to know for first home buyers right now to help them get.

Into the market.

Really, Look, there's there's one lender policy and product that I really like for first time buyers, which is the genuine savings rules. So if you don't have genuine savings normally either three or five percent, you need to have genuine savings up to the purchase price for that three or five percent, and you need to have it in your account for at least six months if you don't.

That's really helpful.

I mean that takes a lot of stress and pressure of people can say, well, they can't actually show any savings, but because they're paying a ridiculous amount of rent each week, and we see.

This because you know they might have they come across any inheritance or a gift from their parents to help them buy instead of having to wait six months. There's ways around it. So we're using that a bit at the moment, which has really been really successful.

That's good.

And Adam, what would you say that people are really asking to help with right now.

Aside from the obvious, which is refinancing, making sure they're getting the best deal if it's not investing or first time buyers, we're doing a lot of equity releasing for renovations. Really yeah, well, there's you know, you talk to people and real estate agents in the market, there's a there's an under supply of property, and there's a lot of clients that just are tide of paying small stand duty moving home. You know, it's not as easy as it sounds.

There's also the stress of selling and then making sure you get straight back into the market, and then the stress of well what if we find something we want to buy but then have trouble selling or not getting the right price that we want for our existing home, like it's a anxelet it is.

And there's obviously bridging finance available to cover that gap, but that's expensive as well because you're paying interest on the whole all both properties. So yeah, renovating it's something we're doing seeing a lot of at the moment. It saves you moving builder spec it out as you know, as you prefer now you're like you're home to be.

So we're doing for a bit of that and increase the value of your home.

Increase value of your home. So yeah, there's a lot of lenders that are willing to give you the money which gives you, gives you a bit of control over it, paying your builder quickly, keeping things moving instead of going through the building construction line pros. As long as it's not major instruct major structural stuff, we're doing a fair bit of that.

Wow, that's really interesting.

All right, Adam as always, thank you so much for letting me pick your braid. And I know I probably like poked quite hard in asking for some maybe uncomfortable, maybe controversial answers from you, So thank you.

For opening up and being so honest.

Pleasure with us.

Now, for anyone who wants to talk to you about their home loan or their homeland application or how they can try and I guess negotiate a better deal with their bank. How well, what is the best way to get in contact with you? And how do you work and what's you charge? Like, what's the process involved?

Yeah? Look, the best way to get in touch is either an email, probably an email at first, because you know, we're always quite busy.

What's your email address?

It's Adam at Blue Lantern dot com dot au. So send me an email there and I'm more than happy to get back in touch and we can arrange your time to either have a meeting on zoom or general chat over the phone initially, and we charge We don't

All right, well, look, thank you everyone for listening today's episode, and thanks again for Adam. Please feel free to reach out to Adam if you have any questions at all, and we will probably chat with you in the next four or five weeks again to pick your brain about Australian mortgage money.

Can't wait. Thanks Canna