Welcome to the summer edition of Bloom’s Haven Newsletter.
As the Australian Government works to help steer the country through its first recession in more than 28 years, it has delivered a raft of economic stimulus measures in an attempt to help counter the impact that COVID-19 has had on the economy. One of these measures aims to reduce the complexity around the rules governing lending loan approval processes. If you are in the market for a new mortgage or to refinance an existing loan, now is a good time to talk to me about how these changes may impact your situation. Bloom Haven’s Money section covers the following 3 topics:
- What does the recession mean for us?
- Why the Government wants to make it easier to get a home loan
- Teaching our kids how to manage money
Bloom Haven Money
Australia has gone into recession for the first time in 28 years. What effect could it have on you?
Australia has had a very good run when it comes to continued economic growth. Twenty-eight years without a recession is a record achievement, with the previous one in 1991. So what is a recession, and what does it mean for you?
What is it?
The Reserve Bank of Australia has two different definitions of what a recession is. The first is a more general one:
A recession can be defined as a sustained period of weak or negative growth… that is accompanied by a significant rise in the unemployment rate. Many other indicators of economic activity are also weak during a recession. For instance, levels of household spending and investment by businesses are usually low.
A more technical definition is when there have been two consecutive quarters of negative growth.
The 7 per cent drop in growth in the June quarter is Australia’s largest drop since we began recording data in 1959. But compared to other countries we are still in a better place. The UK and New Zealand have recorded more than 20 per cent drops, while the USA’s economy has contracted by 9.1 per cent. Hopefully, this means our economy can turn around faster than most.
What’s more important than these financial definitions and figures, however, is understanding the human cost – the real day-to-day effect it has on our lives. A recession means that people lose jobs and pay drops – and that really hurts.
Unemployment rises
One of the key impacts of a recession is the rise in unemployment and the long time it takes for people to get back into the workforce. Many have lost their jobs during the current crisis and others are relying on the Government’s JobKeeper payments to keep their incomes going.
A financial hit like this, and the hardship it creates, have a massive toll on people’s physical and mental health. The stress and misery of losing a job, and possibly losing your house as a result, is extremely difficult and we should all look out for our family, friends and colleagues if they’ve recently become unemployed.
Even before the pandemic hit, more than three million Australians were living below the poverty line. The Government support through JobKeeper and JobSeeker have helped some get out of it, but only temporarily. When the support stops, it’s predicted that more people will be living in poverty than ever before.
Pay rates slip
Another key feature of a recession is that salaries don’t go up. Right now, many people have reduced hours or taken pay cuts and it will become much harder to get a pay rise. This can obviously make it harder to pay an ongoing debt, like a home loan, if you had planned for the usual continued growth in wages.
Is there any good news?
During this pandemic, people have been preparing for what may come. We’re not talking about hoarding toilet paper. Credit cards are being paid off faster, and people are putting more into their mortgages.
It’s a recession like no other, and so things are changing in ways that are anything but typical. As lockdowns ease across the country, we are seeing some positive signs.
Firstly, many people in industries that were affected by the shutdowns are now getting back to work. Canstar, one of Australia’s leading economic research agencies, reports that retail spending is growing at the fastest annual rate for 19 years. And house prices are rising in many regions.
What about the property market?
Melbourne has experienced a slump in property prices but, if you’re lucky enough to be in a region that is relatively free of the virus, the market is probably reasonably healthy. Some places are even experiencing record-high home prices. Not what you’d typically associate with a recession.
Less than a year ago, when the pandemic started to take its grip on the world, it would be impossible to predict what it would be like right now. Now we are in a recession, and the path to recovery is still a big unknown, it’s never been more necessary to do a financial health check to get your finances and home loan in order.
Interest rates are at an historical low, and most believe they’ll stay there for some time. They could even drop further. This means there are home loan products and options out there that could better protect you for whatever happens next. Protecting your savings and minimising debt is essential. And finding a loan that has inbuilt flexibility could be just what you’re looking for to help navigate the next couple of years.
As a mortgage broker, we’re best placed to help you manage your mortgage in this recession. Please get in touch to talk about what you can do to be prepared for whatever happens next. Because the one thing we can be sure of is that this recession will end. They always do.
Mortgage approval rules are set to be relaxed to try to help the economy recover from COVID-19. But is this a good thing?
To help counter the effects of COVID-19 on the economy, the Federal Government has announced plans to loosen the responsible lending laws governing the loan approval processes. The idea is to make it simpler to buy a house or refinance your current home loan. With people continuing to buy homes and building new ones, the economy will get a shot in the arm that will hopefully help get us through the pandemic. At least, that’s the plan.
The proposed new laws may mean that lenders won’t have to be as strict when they verify a person’s financial details. Borrowers wouldn’t have to supply as much information, which should reduce the time and cost of getting an approval and provide fewer barriers.
But the current set of laws are there for a reason. Since the Global Financial Crisis more than ten years ago, the Government imposed much stricter lending laws to help protect both borrowers and the economy.
The GFC was blamed in part on the easy credit that had been going around. If you can remember the pre-approved credit cards that often appeared in your mailbox, you’ll understand. Many people and businesses ended up with loans they couldn’t realistically afford. When the credit crunch came, people couldn’t cover their repayments. The dominoes of debt all fell, which caused a catastrophic effect on the world economy.
Because of this, laws were introduced to ensure more responsible lending. This means that lenders now require very detailed records of an applicant’s finances, income and spending to ensure they can meet their repayments. Lending people only as much money as they can afford to repay is clearly the right thing to do. Still, many people believe the rules are too restrictive and make the process too complicated, including federal treasurer Josh Frydenberg.
“As Australia continues to recover from the COVID-19 pandemic, it is more important than ever that there are no unnecessary barriers to the flow of credit to households and small businesses,” Mr Frydenberg said.
“Maintaining the free flow of credit through the economy is critical to Australia’s economic recovery plan.”
The last thing anyone wants is for people to go and start borrowing too much. The proposed new laws may not require the lenders to go into as much detail as they must now. Instead, more of the responsibility will be on the borrower to make sure the information they provide is correct. It may be more of a case of buyer beware when you’re applying for a loan.
Once again, a mortgage broker is perfectly placed between the borrower and the lenders. Because we are here to act in your best interest, it’s our job to ensure you get the loan that’s right for you, including with an affordable level of debt. The mortgage broker ‘best interests duty’ that was recently legislated means that there will be legal obligations for me to find you a loan that is correctly matched to your circumstances.
The Government’s proposed new laws to try to help make it easier to secure a loan and buy a new home or refinance are important in helping our economy get through the current crisis. And there’s no doubt that Australians need advice and assistance more than ever.
By lessening the barriers, we’re looking forward to a more efficient process that removes complexity for both the borrower and the lenders. We can spend less time on verifying every minute detail, which will help the process move more smoothly and quickly.
Increasing our responsibility gives us greater control of the application process and means we can be of more service to you than ever, just when you need it most.
While the new laws are not expected to come into play until March 2021, it’s a good idea to get a gauge of where you stand and how any changes can increase your options. If you want to have a chat or ask any questions, please just get in touch.
Helping your kids get a handle on money can set them up with good habits that last forever.
It’s no surprise to learn that the younger you start teaching kids about money – how it works and how to manage it – the better prepared they are for the rest of their lives. So what’s the best way to teach them?
In some ways it’s getting even harder to see what money is and understand its value and role because, thanks to COVID-19 and social distancing, we’re not using cash like we used to. What was once a very visual transaction is now a much more abstract concept, with tap-and-go and online payments happening at the touch of a screen.
Two sides of the coin.
One way to do it is to look at it in two parts – where it comes from and where it goes. Or how to earn it and how to spend it.
When you’re really young, you probably just think money comes from your parents’ purses, wallets and pockets. Kids don’t realise that one of the reasons you’re not always at home is because you’re working to earn money. Pocket money is an excellent opportunity to teach them that when you work, you get paid something in return.
Learn to earn.
Instead of simply giving your children a set sum each week, break it down into a few jobs, each of which has its own smaller value. The more they complete, the more they earn. Don’t do it for tasks you’d expect them to do normally, like cleaning their room, making their beds or helping with the dishes. (It is also important to teach them that some things aren’t done for monetary reward but are just part of everyday life and being part of the ‘home team’.) Let them earn their pocket money by doing things like looking after pets, cleaning the car, doing some weeding or watering the plants.
Saving and spending.
Now your child has earned some money of their own, it’s what they do with it that counts. Starting good habits here will help them manage their money for the rest of their lives.
A popular teaching method to help them understand the abstract concept of money is to use three jars or piggy banks. Each one has its own label – Saving, Spending and Giving – and you encourage them to split their money between all three.
Saving. Together with your child, set a saving goal. Think of something they can work towards – something important to them that costs a bit more but is still achievable. It should take them a few weeks or months to save for it. Once they get it, they’ll understand how good it feels to save for something, the satisfaction of being patient, and that they don’t have to spend their pocket money as soon as they get it.
Spending. This is the bit of money that they can spend as soon as they get it – little treats, small toys and anything fun to reward themselves and let them spend their money the way they choose to.
Giving. Whether it goes to a charity or to buy presents for family and friends, this lets them feel how good it is to share and spend money on others.
And if they’ve blown all their money, it’s a good chance to make them understand that money is finite. Tell them about budgeting and work out with them how they might better divide their money among the three piggy banks. They should be able to reach their savings goals and still do the things they want to in the short-term.
What now in the time of COVID?
Like all things, even pocket money and saving jars have gone online. There are plenty of apps to explore and reviews to check out. The sophistication of technology may actually make these better, but the principles of earning, spending and saving are the same.
While us oldies might mourn the disappearance of real cash pocket money and shaking the piggy bank to hear the coins, it may be a good thing that children learn online ways of managing money.
Chances are they’ll live and work in a time when all day-to-day money is digital.
The key is to include children in your own spending and saving habits. Sit them on your knee when you pay your power bill online. Show them the bill you’re paying, the account it comes out of, and where it goes. Even let them click the buttons and have a bit of fun (about the only time anyone can have fun paying a bill). The most important thing is to talk about it, explain what you’re doing and why you might not have spent the money on something you want so you can pay for this necessity.
Talking about money as part of your day-to-day life is a great way to help children understand. When kids pick the next show to watch on Netflix, it feels free because it’s already there waiting to be chosen. It’s good for them to know it’s not free.
Bring them into your saving and spending plans so they understand why you are making certain decisions. It helps them to realise that the reason you’re not all going out for a burger and a movie is because you’re saving for a family holiday.
It’s not just big-ticket items. When the children come to the supermarket with you, get them to help make the decisions. Is it worth paying an extra 50c for something if it tastes pretty much the same? Look for special deals or the cost per 100g. Just because there’s a special on five avocados for $10, should you get them if you only need two for $5?
Whether you use jars, piggy banks, apps, or something else, the one thing to remember is kids learn from your behaviour. How you spend your money, how you approach savings and how you talk about it will ultimately shape their views and behaviour and, most importantly, stop them relying on you and get them used to the idea of paying their own way.
And on a less serious front, Bloom Haven’s Social section contains:
- Trivia – Things you say without realizing that you are quoting Shakespeare
- Food – Genius BBQ tips
- Our chance to win $1,000 competition
- Announcing our Summer newsletter’s competition – “Cake off” best attempt at home made cake. Entries closes 13 January.
- Congratulations to our Spring competition winner “Show us your Shed”
Bloom Haven Trivia
Things you say without realising you’re quoting Shakespeare
A playwright, poet and actor, William Shakespeare is widely considered the greatest writer in the English language. And unknowingly, many of us quote him daily, with our modern vernacular riddled with lines from the Bard’s plays. Following are a few, how many do you use?
“Wild goose chase”
From: Romeo and Juliet, act II, scene IV
“Nay, if our wits run the wild-goose chase, I am done, for thou hast more of the wild-goose in one of thy wits than, I am sure, I have in my whole five. Was I with you there for the goose?”
Mercutio
“Green-eyed monster”
From: Othello, act III, scene III
“O, beware, my lord, of jealousy! It is the green-eyed monster, which doth mock the meat it feeds on.”
Iago
“Good riddance”
From: Troilus and Cressida, act II, scene I
“A good riddance.”
Patroclus
“Fair play”
From: The Tempest, act V, scene I
“Yes, for a score of kingdoms you should wrangle, and I would call it fair play.”
Miranda
“You’ve got to be cruel to be kind”
From: Hamlet, act III, scene IV
“So, again, good night. I must be cruel only to be kind. Thus bad begins and worse remains behind.”
Hamlet
“Heart of gold”
From: Henry V, act IV, scene I
“The king’s a bawcock, and a heart of gold, a lad of life, an imp of fame, of parents good, of fist most valiant.”
Pistol
“Kill with kindness”
From: The taming of the shrew, act IV, scene I
“This is a way to kill a wife with kindness, and thus I’ll curb her mad and headstrong humour.”
Petruchio
Source: mentalfloss.com
Bloom Haven Food
Gas bottle running low? The hot water test.
The gas bottle running out half way through the steak being sizzled will rattle the most confident cook. Check how much gas is left by carefully pouring hot tap water down the side of the gas bottle (before you crank up the barbie, and more water is better), then slide your hand down the outside from the top to the bottom – the steel will feel warm until you get to the gas-filled part, where it will then feel cool. The key is: it’ll feel cool where there is gas remaining, and warm where it’s empty.
Bereft of a wire brush?
Clean a grotty grill/plate by scrunching a sheet of aluminum foil into a tight ball and scraping it over the barbecue surface – it acts like steel wool by detaching crusted-on burnt debris (this works even better after you’ve cooked and while the surface is cooling down). Half a raw onion (cut side down) rubbed against the grate works in a similar way. The onion’s moisture and acidity helps break down grime and grease (again, this is best done as the hotplate is cooling down post cook).
Sit delicate fish on a citrusy bed.
A piece of fish is delicious on the barbie, but it tends to fall apart as the delicate flesh sticks to the grill plate. Perch the fillet on a bed of lemon slices set directly onto the barbecue surface. Not only will this impart a smoky lemony flavour that marries so well with fish, it will stop the fish from sticking and breaking apart (added bonus: the lemon helps reduce the cleaning afterwards).
Skewer soaker.
Snags and steak are great, but a meat or veggie kebab is a great barbecue addition too. Keep wooden skewers from getting burnt by soaking them in water for an hour or two before threading the chunks of yumminess on. The water-laden skewers won’t dry out, char or smoke as those delicious kebabs cook.
Bloom Haven Review + Win
The Australian Women’s Weekly Children’s Birthday Cake Book
RRP $19.99
First published in 1980, this iconic book has been loved for generations and is the go-to kids’ birthday cake bible for so many Aussies. Its success is a phenomenon. Since the book’s release 40 years ago it has sold more than half a million copies. A 40th-anniversary edition has just been released, and while the train cake cover has had a modern makeover, inside everything is exactly the same.
Many of us have a childhood memory of poring over the pages to choose this year’s cake. Be it the cricket pitch cake lined with a fence of chocolate finger biscuits and dusted in green coconut grass, or the Dolly Varden cake with a skirt covered in marshmallows – choosing your cake was as important a task as eating it! Once the decision was finally made, poor mums and dads across the nation were entrusted with the task of attempting to construct the masterpiece.
We want to see your baking attempts from this Australian treasure. Be it a spectacular success or dismal disaster! Send in your Women’s Weekly cake baking attempt for the chance to win $1,000.
How: send your Australian Women’s Weekly home decorated kids’ cake photo to [email protected]afgonline.com.au placing “Kids’ Cake” in the subject line.
Include: your name, address, email, phone number and the name of your mortgage broker.
Dates: opens on November 13 and closes on January 13.
Winner: will be decided on January 14 and notified by telephone after this time.
Terms and conditions: email [email protected] to request terms and conditions.
Bloom Haven Answers
What lies beneath
Congratulations to Chris for winning our “Show us your shed” competition. Despite zero building experience, Chris designed and built a shed that might look as cute as a button from the outside (a mandatory since it dominates the backyard), but within it lies not only practical storage, but a fully functional home brewery.
Thank you to everyone who entered. We had a stack of brilliant sheds sent in, but a cold beer on tap got this one across the line.
