Should I fix my home loan?

There has been a lot of commentary lately about Home Loan rates being as low as 2.99% and with the Reserve Bank to soon meet again, there may be more reductions on the way.

Many Mortgage Owners are contemplating ‘fixing’ their loan rates, so it’s important to understand the differences between fixed and variable home loans:

What is a fixed rate home loan?

A fixed interest rate home loan is a loan with the option to lock in (or ‘fix’) your interest rate for a set period (usually between one and five years). One of the main advantages of this is cash-flow certainty. By knowing exactly what your repayments will be, you’ll be able to plan ahead and budget for the future. This factor often makes fixed rate home loans very popular for investors over the first 2-3 years they own a property.

A fixed rate loan may be a good option in a rising loan market as any interest rate rises won’t affect the amount of interest you are required to pay. However, if interest rates drop, you might be paying more than someone who has a variable rate home loan.

It’s important to note there may be a number of restrictions associated with fixed rate loans. Often additional repayments are not permitted with fixed-rate loans (or you may be charged a fee). As there is a restriction on extra repayments, the ability to redraw is also frequently not offered on a fixed rate loans, effectively reducing the flexibility of the loan.

What is a variable rate home loan?

A variable rate home loan is a loan where your interest rate will move (or ‘vary’) with changes to the market. This means your interest rate can rise or fall over the term of your loan. Variable home loans may have appealing features like the ability to make extra repayments, often at no extra cost to help you pay down your loan sooner, saving you interest. Variable rate loans may also include unlimited redraws, allowing you ‘draw’ back any extra repayments you have made.

Variable rate loans are more uncertain than fixed interest loans. This can make budgeting for your interest payments more difficult as you need to take into account potential rate rises. If you aren’t prepared, you could have trouble keeping up with repayments.

It is common practice for the banks to not pass on rate cuts to existing and established customers and with interest rates being at record lows and the possibility of further reductions, it is a good time to consider what you should do with your current loan. If it has been 2 years or more since you have had your loan reviewed, then now is the perfect time to call our Mortgage Broker – Warren Richards on ph: 9851 0300 to arrange an appointment.

Record losses expected as scammers target Australians

Australians are set to lose a record amount to scams in 2019, with projections from losses reported to Scamwatch and other government agencies so far expected to exceed $532 million by the end of the year, surpassing half a billion dollars for the first time. “Many people are confident they would never fall for a scam but often it’s this sense of confidence that scammers target,” ACCC Deputy Chair Delia Rickard said. “People need to update their idea of what a scam is so that we are less vulnerable. Scammers are professional businesses dedicated to ripping us off. They have call centres with convincing scripts, staff training programs, and corporate performance indicators their ‘employees’ need to meet.”

Investment scams are one of the most sophisticated and convincing scams and continue to have the highest losses. Nearly half of all investment scams reported this year resulted in a financial loss. These scams are prominent on social media, with ‘Facebook lottery’ scams, the ‘Loom’ pyramid scheme, and cryptocurrency scams particularly common.

Cryptocurrency investment scams have seen record losses, with reports to the ACCC alone of $14.76 million between January and July 2019. Many use social media platforms, fake celebrity endorsements or fake online trading platforms that are made to look legitimate.

Common types of investment scams

Investment cold calls:

A scammer claiming to be a stock broker or portfolio manager calls you and offers financial or investments advice. They will claim what they are offering is low-risk and will provide you with quick and high returns, or encourage you to invest in overseas companies. The scammer’s offer will sound legitimate and they may have resources to back up their claims.  They will be persistent, and may keep calling you back. The scammer may claim that they do not need an Australian Financial Services licence, or that that they are approved by a real government regulator or affiliated with a genuine company.

The investments offered in these type of cold calls are usually share, mortgage, or real estate high-return schemes, options trading or foreign currency trading. The scammer is operating from overseas, and will not have an Australian Financial Services licence.

Share promotions and hot tips:

The scammer encourages you to buy shares in a company that they predict is about to increase in value. You may be contacted by email or the message will be posted in a forum. The message will seem like an inside tip and stress that you need to act quickly. The scammer is trying to boost the price of stock so they can sell shares they have already bought, and make a huge profit. The share value will then go down dramatically.

If you invest you will be left with large losses or shares that are virtually worthless.

Investment seminars:

Investment seminars are promoted by promising motivational speakers, investment experts, or self-made millionaires who will give you expert advice on investing.  They are designed to convince you into following high risk investment strategies such as borrowing large sums of money to buy property, or investments that involve lending money on a no security basis or other risky terms.

Promoters make money by charging you an attendance fee, selling overpriced reports or books, and by selling investments and property without letting you get independent advice. The investments on offer are generally overvalued and you may end up having to pay fees and commissions that the promoters did not tell you about. High pressure sales tactics or false and misleading claims are often used to pressure you into investing, such as guaranteed rent or discounts for buying off the plan. If you invest there is a high chance you will lose money.

Visit ASIC’s MoneySmart for more information about investment seminar scams.

What can you do:

Protect yourself:

  • Do not give your details to an unsolicited caller or reply to emails offering financial advice or investment opportunities – just hang up or delete the email.
  • Be suspicious of investment opportunities that promise a high return with little or no risk.
  • Check if a financial advisor is registered via the ASIC website. Any business or person that offers or advises you about financial products must be an Australian Financial Services (AFS) licence holder.
  • Check ASIC’s list of companies you should not deal with. If the company that called you is on the list – do not deal with them.
  • Do not let anyone pressure you into making decisions about your money or investments and never commit to any investment at a seminar – always get independent legal or financial advice.
  • Do not respond to emails from strangers offering predictions on shares, investment tips, or investment advice.
  • If you feel an offer to buy shares might be legitimate, always check the company’s listing on the stock exchange for its current value and recent shares performance. Some offers to buy your shares may be well below market value.
  • Never commit to any investment at a seminar – always take time to consider the opportunity and seek independent financial advice.
  • If you are under 55, watch out for offers promoting easy access to your preserved superannuation benefits. If you illegally access your super early, you may face penalties under taxation law.

Have you been scammed?

If you think you have provided your account details to a scammer, contact your bank or financial institution immediately. We encourage you to report scams to the ACCC via the report a scam page. This helps us to warn people about current scams, monitor trends and disrupt scams where possible. Please include details of the scam contact you received, for example, email or screenshot.

Scams that relate to financial services can also be reported to ASIC.

We also provide guidance on protecting yourself from scams and where to get help.