November 2019 - Pearl Financial

Monthly Archives: November 2019

Nov 28

What Are The Effects Of Negative Interest Rates

By Editorial Team | Interest Rates

We will try to let you understand what Negative Interest Rates truly mean and how does it affect the lives of an ordinary citizen.

Interest rate cuts have been one of the principal means by the Central Bank in adjusting their monetary policies. Thus, every time there is a crisis, the initial solution of the central bank is to lower their interest rates. If the interest rates are already at zero, and the economy is still not well functioning as it intended to be, therefore, the traditional policy of cutting the interest rates into negative will not also work.

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Nov 27

What Does A Mortgage Broker Do And Why Should You Use One?

By Editorial Team | Home Loans , News

Investing in the property market requires you to maximize your budget, especially if you are planning to buy a new home for your family. Joining in the property market would cost you a lot. You will have accountabilities such as legal expenses, deposits, and some other costs adding up.

But, nowadays, anyone can already reach their dream of having their own home in a cost-effective way. To find a home loan that is perfect for your budget and lifestyle, you need the help of a mortgage broker.

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Nov 26

The Things You Should Consider Before Fixing Your Home Loan

By Editorial Team | Home Loans

Borrowers have one important question to themselves regarding their Home Loan and that is either “to fix or not to fix?” It is crucial to think about your decision many times in order for you not to encounter difficulties in the process of settling repayments.

Australian borrowers are mostly attracted to fixed-rate home loan offers because of assurance. A fixed-rate home loan is the advisable home rate loan for first-home buyers as they are the ones who are tight on their budget. In doing so, they can carefully plan for their budget and stay on top of their repayments.

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Nov 25

Home Loan Rates Beginning With 2 Is The New Norm

By Editorial Team | Home Loans , News

There are 6 lenders with variable Home Loan Rates with a 2 at the beginning, according to a report from RateCity.

They are expecting 6 to climb to 20 at the next RBA (Reserve Bank of Australia) cut if banks pass on at least 0.20 % to borrowers.

Sally Tindall, the RateCity research director have stated that the owner-occupier rates beginning with a ‘2’ could become the new norm if the central bank made 2 more cuts to the cash rate.

“With 2 more rate cuts on the cards, we could see the lowest variable rate drop below 2.60, maybe even below 2.50%.”

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Nov 20

The Concept Of Open Banking

By Editorial Team | Interest Rates , Investing

What Is Open Banking?

Open banking refers to large, traditional banks opening up the data they have on customers in order to allow new products and services to be created, supporting all of that up with strict technical standards.

In essence, it allows customers to share their financial transaction data with authorized third parties, and allow authorized third parties to accept payments from their bank accounts.

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Nov 19

How Do Home Construction Loans Work?

By Editorial Team | Building , Fundamentals , Home Loans , Interest Rates

What Are Home Construction Loans? 

Home Construction Loans allows a new home to be built through the term of construction. It is based on the time needed to build a home, and it usually ranges from 6 months to a year. Once your construction loan is approved, your lender will pay your builder every period, after work is completed. As soon as the home construction ends, your loan repayment begins.

Most first home buyers prefer having their home construction loan be combined with their standard mortgage plan, into something termed as a construction-to-permanent loan. This avoids the need to refinance after construction and go through 2 different closings.

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Nov 18

How Savings Rate Cuts Affect Consumers

By Editorial Team | Interest Rates , News

What is a Savings Rate?

A Savings rate is defined as the value stated as a percentage or ratio, that an individual can deduct from his or her net income for the purpose of saving it for retirement. That particular amount of money is usually put invested in very low-risk investments such as money market funds or for a retirement account.

What Are The Factors That May Affect Savings Rate?

Savings rates tend to reduce as populations age. In this case, they chose to spend their money rather than saving them. Interest rate policies can also affect the decision of the people. Some other factors include:

  • Confidence

Consumer confidence can affect the savings rate. If the households could feel negativity towards the economic opportunities, consequently, they will prefer to save more and focus on paying off their debts.

  • Financial Status

When a credit crisis happens, credit can’t be obtained easily. Therefore, financing will decrease, and people will choose to focus on saving. On the contrary, a greater chance of credit, and an increase in work productivity can cause a lesser chance of saving.

  • Wealth  

 Another factor that can lower savings rates is the increase in wealth. People usually save to buy properties such as their own home. The housing market has a big influence on saving in Australia. Increasing house prices promotes mortgage equity withdrawal, and at the same time, an increase in spending. Conversely, a decrease in house prices has the opposite effect.

  • Net Income Growth

Savings rates can be affected by wage growth. Negative net income growth will result in a decline in the savings rate. As a result, people will spend through financing and from their savings.

  • The Effect Of Savings Rate Cuts

Economic experts believe that a higher interest rate can lead to lower overall expenditures and higher savings.  It is because the substitution effect outweighs the income effect.

Substitution Effect

Lower interest rates substitute saving for spending. It implies that a cut in the interest rate also means a drop in income as these people receive lower income payments. It will attract consumers to hold their cash rather than spending it. For instance, if a pensioner relies on interest payments from saving, he may decide to save more with the intention of maintaining his target income from his savings.

Income Effect

The amount of spending is based on income. Lower interest rates make saving less attractive. However, some consumers may react to lower interest rates by saving more so as to maintain their standard of living. On the contrary, some consumers may spend more if their income increases and they may spend less if their income drops.


Based on the latest news from RateCity, ANZ and NAB have reduced their savings rate again. The cutting of the savings rate intends to make financing at a lower cost for consumers and businesses. It also promotes spending and strengthening the economy.

Nov 15

Westpac Has Revised Owner Occupied Lending Policy

By Editorial Team | Home Loans

This move from the major bank (Westpac) is to allow owner-occupied loans to be secured against an investment property. It is for the situations that may happen wherein the loan is to be secured by a non-owner-occupied residential property. Westpac has already informed their brokers about it and this update will be effective on Tuesday, November 19, 2019.

What Does The Revised Owner Occupied Lending Policy Covers?

The Revised Owner-Occupied Lending Policy will be implemented in the following instances wherein; this update does not intend to generate income as well as not a tax deduction for investment. 

It was also noted on the revised policy that the use of non-owner occupied residential property as a security in purchasing an owner-occupied home is acceptable. It is not only limited to the former but also on the use of the equity in non-owner occupied residential property to fund owner-occupier purposes such as the renovation of an owner-occupied property. The exception of this policy is on non-owner occupied residential property to be used as security for bridging loans, as the bank will now allow it. 

The announcement for this revision came after less than a month when Westpac has announced that it would be increasing the maximum LVR (Loan-To-Value Ratio) for investor loans with an interest-only term rates at 80% – 90% which also includes any capitalized mortgaged insurance premium this follows the decision from the Reserve Bank of Australia to reduce the official cash rate. 

Westpac general manager for homeownership Will Ranken stated that “Providing the support and finance to help buyers purchase their next investment property is a key focus of our lending strategy. “ He then concluded, “We believe this change will provide a competitive proposition for investors looking to purchase their next property.”  

Nov 15

FBAA Calls For A Review In The Credit Policy

By Editorial Team | Home Loans , Interest Rates , News

The effect of lower mortgage rates will fail to stimulate lending within Australia unless banks will ease their credit policies, which were tightened in the midst of investigation from the banking royal commission.

Managing director of the Finance Brokers Association of Australia (FBAA) Peter White, has said Reserve Bank of Australia’s rate cuts isn’t enough to stimulate the housing market on their own, especially as banks use unrealistic credit criteria to push legitimate buyers out of the market and disadvantage borrowers.

During the FBAA’s annual conference, White said, “We need a more considered approach to credit policy because right now there are borrowers with the capability to pay a mortgage that is being rejected for a variety of reasons.”

White stated that banks are beginning to take action as they continue to lose business, citing Commonwealth Bank’s recent decision to lower its floor rate the second time in four months as an example.

 “Banks are being forced to act because the market is flat, and we will no doubt see that other banks will follow,” he added. 

“The FBAA has said before that the buffer used by banks is ridiculously obstructive to borrowers.

“In no way am I suggesting we loosen the credit criteria, but in an economy that needs stimulating, interest rate cuts are only a part of the solution.

He then concluded, “Denying legitimate and credible borrowers a loan due to credit policies that make no sense doesn’t help anyone.” 

Nov 15

The Role Of The Australian Securities And Investment Commission (ASIC)

By Editorial Team | Legal



Running a business is not that simple. There are important things that should be taken into consideration. In Australia, the government has established a government body to make sure businesses are well regulated. There are regulatory authorities for business as well as for the exchange market. They demand strict compliance with the different regulations that require each business must cooperate.

Recent news from The Adviser, ASIC had shed light on the upcoming RG 209 guidance. This aims to determine the changes and additions to the guidance that can be of help to the holders of an Australian credit license in order to understand ASIC’s expectations for complying with the responsible lending obligations.

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