December 2019 - Page 2 of 2 - Pearl Financial

Monthly Archives: December 2019

Dec 09

What Does All The Interest Rate Cuts Mean?

By Shane | Interest Rates

The Interest Rate Cuts from the Reserve Bank of Australia have different effects on society. The four major banks have managed to answer these changes implemented basic standard variable mortgage rates one after another.

Many, but not all, would benefit from this interest rate cut changes. There still some that would not be benefited or feel that these changes would be a disadvantage on their part. The interest rate cut is a very important move because as we know, there are so many borrowers in Australia and most of them are having difficulty when they are already dealing with the housing repayments. The level of indebtedness in Australia is also increasing and it also means that the interest rate cut has a stronger impact than it used to be in previous years.

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Dec 05

AFCA To Further Assess Broker-Originated Loans

By Shane | News

A brokerage director has expressed his regret for the widening gap between the funding that would likely be acquired by the borrowers through a direct application from the bank and those who go through a broker.

Loan Saver’s Adviser, founder, and director, Mr. Colin Kidd, has stated that he had observed an evident risk concerning the brokers. He mentioned that brokers are not completing detailed expenditure analysis, and there is a difference between the way expenses are obtained by brokers and lenders.

Mr. Kidd has said that brokers are able to match the expenditure requirements of the lender but that the risks involved with the analysis will stay with the broker, he continued.

The Loan Saver Director added that in order to reduce the compliance risk, the brokers need to obtain valuable information about expenditure by the use of bank statements than any other requirements if they will directly apply in the bank. He then added that a signed budget is not acceptable as an expenditure analysis.

Upon considering the recent dealings with lenders,

the Loan Saver Director said that there are cases where he had included a significant singular expense in the required analysis. He had explained in the notes that it is a singular expense linked to a new business to be launch. However, the lender has indicated that the new small-business owner’s expenditure was too big to pass its serviceability assessment. This happened despite a clean credit record of the customer.

Lenders now need to follow the indicated expenditure noted in the statement of position. Thus, notwithstanding the singular expense, they will use the full amount. Now, if clients will go directly to their lender, they don’t need to go through with the expenditure analysis, but rather, the lender will accept the client’s statement of position, and the loan will be processed.

MR. Kidd had noticed that some borrowers have been able to acquire a loan directly from the bank which they could not do through a broker. Having a higher chance of obtaining a loan directly from the bank than through a broker will affect their means of deciding where to apply for finance.

One of the main reason why clients go directly is because of the long waiting period that if they go directly through a bank, they won’t wait for too long as they will be getting an approval. Therefore, bank managers write loans that were declined by the brokers. This is why there is an existing widening gap between what can be funded through a lender and what can be funded through a broker. 

Moreover, the AFCA (Australian Financial Complaints Authority) has been assessing historical cases based on the current credit policy requirements around expenditure. They have been applying retroactively the current assessment criteria to loans written before the Global financial crisis, and this is a cause for alarm, especially for the brokers who write large amounts as they will probably face litigation.

Dec 05

Pepper Money Has Implemented A New Offer For Brokers

By Shane | News

Pepper Money is Australia’s leading non-bank lender, which covers both mortgage brokers and for many non-bank lenders as a financer for wholesale. As a non-bank, they operate a slightly different way as compared to banks and other major financing institutions.

With this regard, Pepper Money just released a new offer for brokers and their prime and near-prime customers. Australia’s number one non-bank lender has announced that brokers will be able to offer their customers discounted interest rates offered in various LVR (Loan-to-Value Ratio) bands applicable to all of their prime and near-prime products. It shall cover all full documentation and alternative documentation customers except for construction loans.

In this manner, brokers can now offer their prime home loan customers rates from 3.36% per annum, which has a comparison rate of 3.56% per annum.

At the same time, brokers will also be able to access near-prime rates from 4.26% per annum with a comparison rate of 4.76% per annum. This limited-time offer is valid until August 30, 2019.

The Director of Sales and Distribution for Pepper Money has stated that their goal is to help more families and more people to achieve their dream of homeownership in Australia which we all know that in real life, the right interest rate can make all the difference.

He also added that they are committed to providing brokers and their customers with flexible and competitive home loan products to help them achieve their goals. This is the main purpose of their offering, which is to deliver real-life solutions for all sorts of real-life situations.

Pepper Money’s decision was in addition to the 0.25 percentage point rate cut declared last month. Their declaration also takes place following their move to reduce variable interest rate for their existing customers by 20 basis points, this is in compliance with RBA’s (Reserve Bank of Australia) cash rate decision.

Dec 03

RBA Announced Their Official Cash Rate In Time For Christmas

By Shane | Interest Rates , News

There have been speculations whether or not the RBA (Reserve Bank of Australia) would cut interest rates once again to boost Christmas sales. The speculations have already been cleared as the RBA has already decided. The RBA Has Announced Their Official Cash Rate In Time For Christmas during its last meeting of the year held on Tuesday (December 2, 2019) to hold official interest rates steady as it waits to see if the economy closes out 2019 on a positive note.

The bank decided to hold the official cash rate at a record low of 0.75% in line with the financial market and economist expectations.

The market has already expected that the RBA to let its rates steady with the prediction that the bank would wait to see how the Christmas and New Year spending activity will affect the economy, before making another decision early next year. This just explains that there are still open possibilities for future cuts if the low cost of borrowing and tax cuts fail to stimulate the economy.

RBA Governor Philip Lowe has stated, “Outlook for the global economy remains reasonable”, adding that “while the risks are still tilted to the downside, some of these risks have lessened recently”.

“Given these effects of lower interest rates and the long and variable lags in the transmission of monetary policy, the board decided to hold the cash rate steady at this meeting while it continues to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time,”

 “The main domestic uncertainty continues to be the outlook for consumption, with the sustained period of only modest increases in household disposable income continuing to weigh on consumer spending,” he added.

He also noted that “The low level of interest rates, recent tax cuts, ongoing spending on infrastructure, the upswing in housing prices and a brighter outlook for the resources sector should all support growth.”

Property prices and investors appear to have been the biggest beneficiaries of the RBA’s 0.25% interest rate reductions in June, July, and October.

Dec 02

How Can A Recession Affect The Economy

By Shane | Interest Rates

What Is A Recession?

It is a term of an overall economic decline and is usually followed by an immediate decline in the stock market, an increase in unemployment, and a drop in the property market. A recession is normally less serious than depression. It is a decrease in economic activity over a certain period of time.

The Impact Of Recession On The Following Economic Factors

Supply And Demand

Though the Central Bank has other means to adjust the interest rate, it still doesn’t have full control of it. The laws of supply and demand are reasonably affected by interest rates. During a period of recession, people will usually choose to save their money because of their lack of confidence. 

Most people usually are expecting to lose their jobs so they hesitate to spend or borrow, and instead, they chose to borrow. As a result, there is more supply of money than demand in borrowing. During a period of recession, a paradox of thrift is deemed, it is because the consumers chose to save their money rather than use it for consumption, and this causes the recession to get worse.

It is not a bad thing to save, however, if all people chose to save, they further limit the decision of consumers to spend, thus it makes the recession more severe.


While there is a decline in the economy, the demand for borrowing is also decreasing. A lack of demand drives interest rates to decline. Furthermore, the monetary policy employed by the central bank in times of recession is to increase the supply for money to reduce interest rates. Low-interest rates boost economic activity through consumer spending and investment in business and cheaper financing with low-interest rates.

Interest Rates

Interest rates largely depend on the economy’s condition.

When there is economic growth, the demand for money increases, and it influences the interest rate to drive upwards.

On the other hand, the economic downturn affects the downward impact on interest rates. Therefore, interest rates during a recession tend to drop, and this is because the inflation rate is low, and the central bank would like to deal with and encourage the economy.

Essentially, lower interest rates should help the economy from recession, as it reduces the cost of borrowing, and it should promote investment and consumer spending.

Property Values

During a recession, with unemployment continuously increases, it is expected that most of the people will not be able to afford their mortgages, and therefore we can observe home repossessions. In this situation, an increase in the supply of housing but a decrease in the demand is expected.


The investment will drop as companies minimize on taking risks and uncertainty. Borrowing can also be more difficult at this time banks are short of cash.

It comes, and it goes, that is what recession is all about. There are periods of recessions that are more severe and last longer than the others. However, as they say, there is always a rainbow after the rain, and therefore, a recession always ends. When problems in the economy are solved, it is always followed by economic growth.