Welcome to the Entourage Report for 2020/21
This year we reflect on one of the toughest years globally ever. We have clearly seen the resilience of the Australian people and particularly the Entourage community. We saw the first recession declared in 30 years. Which lasted exactly three months. We saw interest rates hit their lowest on record both the cash rate administered by the RBA at 0.10 per cent and fixed rates on offer by Australia’s lenders sitting below 2 per cent. Hit play on the video to the left to watch Damien Roylance’s welcome update.
View and download a pdf copy of the Entourage Report here.
Download Entourage Report 2021
In a year like no other, Entourage went from strength to strength reporting a record year of over $300M in settlements.
With interest rates at record lows, we were able to help lots of households make the most of the savings to be had. This financial year we helped our existing clients save over $500K annualised by repricing their existing loans with their current lender.
Entourage Finance settled loans across 24 different lenders, with Macquarie, ANZ and Bank of Melbourne being most popular with our clients this year.
Reasons for borrowing
Looking at Entourage settlement data, 63% of clients were buying new property either as upgraders or first homebuyers. A further 35% of all of our lending for last financial year was made up of people refinancing existing loans. This was to take advantage of dropping interest rates, consolidate debt and save money.
We also saw women taking a step up in the market. Of Entourage buyers who were purchasing alone, 65% were women. Our proportion of pre-approvals was also higher among single women than men, with women making up 60% of solo pre-approvals.
As the Federal budget announces more support for single parents buying property and another 10,000 places open for the First Home Buyer Scheme we expect to see this segment of buyers continue to increase in the coming year.
Fixed Interest Rates
20/21 financial year was the year we saw fixed interest rates become popular once more. 27% of Entourage clients have chosen to fix either all or part of their loan.
But why were fixed rates so popular? The reason is primarily because they dropped so low and with the future so uncertain, many people have taken a defensive strategy with respect to their lending. In some instances, four-year fixed rates dropped well below 2% per annum – historically the lowest fixed interest rate home loans that have ever been available in Australia.
This was thanks to the pandemic. The Reserve Bank of Australia (RBA) made available to Authorised Deposit Taking Institutions (ADI’s) a huge funding facility at a rate of 0.10 per cent per annum for three years. This meant the lenders in Australia had access to exceptionally cheap funding for the next three years, resulting in their being able to drop interest rates on both short and long fixed term products.
The gap between fixed and variable rate products also changed. The discount to fix in a home loan interest rate rather than hold it at a variable rate is around 0.5 per cent.
The RBA went on to drop the cash rate to a record low of 0.10 per cent and have stated they plan on leaving it there for three years. This also impacts the rate the banks pay on the funds they access to lend to borrowers, keeping downward pressure on rates for the foreseeable future.
The Australian residential real estate market is now estimated to be valued at $8 Trillion representing 52.9% of household wealth. This is underpinned by $1.9 Trillion of outstanding mortgage debt. The commercial market is more modest at $958 Billion.
Click play on the video to the right to see Antoinette’s Property Update.
Melbourne’s top growth suburbs for the Mar-21 quarter hold few surprises. Toorak saw bumper growth with an increase of 26.8% growth this quarter. There are a huge number of new suburbs nudging the $1M median house price so expect to see some big gains across the board throughout Melbourne as the year progresses.
From a legal perspective there were range of different legislative triggers pulled throughout this year ranging from amendments to stamp duty payable, a newly proposed land tax and some pretty sweeping changes for investment property holders who have Renters.
Stamp duty waiver change
As the Victorian Stamp Duty waiver comes to a close at the end of June there are some important points to remember if you don’t sign a contract before the deadline ends.
Amending contract dates (i.e. back dating contracts to get the discount) is not on!
The SRO considers this to be fraud (it is fraud – let’s call a spade a spade) and the SRO is able to issue and enforce fines of up to $99K each for the purchaser, vendors and their representatives if fraud is proven.
Buyers must ensure that they are signing their contract within the eligible time frames and must not attempt to amend or re-sign a contract fraudulently.
Another implication is if you have a finance pre-approval in place which includes the stamp duty discount. On a purchase of $800K, you’re looking at a discount of $10.7K if you aren’t a first home buyer. Without the discount you would be required to cover this shortfall of $10.7K and it can’t be capitalised onto your loan.
If you are currently pre-approved and concerned that you won’t be able to purchase by the 30 June 2021 deadline, it’s important you speak to your finance broker and legal representative now. Ask your broker to review your pre-approval and funding position. This is to ensure you have enough funds to cover costs meaning you won’t be faced with a shortfall when settlement day arrives.
Financial planners have seen much change to their industry over recent years, this has included an overhaul to commission structures, compliance around giving advice and undertaking to ensure greater personalisation at every step along the way. Some of these changes have meant the cost of accessing financial advice has increased for consumers. Just what is financial advice worth? We explore this idea below.
Superannuation and savings balance both changed throughout the year of COVID, with savings balances for lots of households going up, credit card debt going down. Unfortunately some people emptied their superannuation accounts with some long term impacts to their retirement savings – what the end result looks like we wait and see.
How does your super stack up?
To the left we’ve compiled a table with average balances for men and women across a range of different ages. This is compared against the average minimum balance suggested by Super Guru by the AFSA. How healthy is your balance looking?