Save on electricity bill – switch on to power savings

With electricity costs rising and temperatures dipping, now is the perfect time to get charged up about changing your home habits.

We’ve put together our top tips to help take the shock out of your next electricity bill and help you save on electricity bill. You might be surprised how seemingly small changes can add up to big savings over a year.

1. Turn off at the wall
Did you know we waste electricity when we’re not
even using our appliances? Make sure you turn your microwave, washing machine, dryer and television(s) off at the power point when not in use and look forward to around $180 in savings each year.

2. Fill as you go
If you love several cuppas a day, boil just the water you need. Filling and boiling the jug unnecessarily five times a day chews up more than $50 of electricity a year.

3. Hang out
Clothes dryers are some of the hungriest appliances when it comes to energy use. You can shrink your annual bill by around $300 by hanging your laundry out to dry. If the weather is too wet, buy a clothes horse for indoors or hang items on a shower rail. If you have to use the dryer, clean it after each use. A lint-clogged dryer will use up to twice the energy to get the job done.

4. Cold wash
While we’re still in the laundry, if you have an electric hot water system and wash in warm or hot water, you’re probably forking out an extra $100 a year. Switch to cold and watch the savings flow.

5. Keep your cool
Fridges eat through plenty of electricity. Make sure yours is running as efficiently as possible by checking the door seals are air tight, and set the fridge temperature to four or five °C and the freezer between -15 and -18°C. Every degree lower increases energy costs by around five per cent. If you have a second fridge, only turn it on when necessary. Left running continually, it will cost you about $250 a year.

6. Global switch
Replace incandescent light globes with energy-efficient ones. They not only use up to 80 per cent less energy, but last longer, so you get to save twice.

7. Shut down
Turn off your computer when you’re not using it and save up to $60 a quarter.

8. Lights off
There used to be an urban myth that it costs more to turn lights on and off, so best to just leave them on. Thankfully that myth has been busted. If you’re not in the room, turn off the lights. You’ll save around $80 a year.

9. Hot water
Install a solar-boosted hot water system and save up to 90 per cent on electric hot water costs when the sun is shining. If you’re running an electric system, set it at 65°C or lower to keep costs in hand and turn it off if heading away for a week or more.

10. Off peak
Take advantage of cheaper off-peak rates and switch the dishwasher and washing machine on after 10pm. Make sure you only put on full loads.

Lender support adding weight to AFG’s recent submission to the Financial System Enquiry.

AFG recently approached its lender panel seeking public endorsement of the broker channel.

We asked each national residential lender to publicly endorse the importance of the broker channel and to echo the many dangers of any move towards a fee for service model. We are pleased to let you know we have received endorsements from the bulk of the panel which we are sure you’ll be interested to read.

Simply click on each of the lender logos in colour to read their individual responses. Please note, the Bankwest and Westpac are two lenders we’ve received acknowledgement from but no endorsement. The remaining logos in grey are lenders who are yet to provide an endorsement of any kind.

Endorsements received

AMP
Suncorp-Bank
Adelaide-Bank
ANZ
Pepper
NAB
Me-Bank
La-Trobe
Heritage-Bank
Bluestone
ING
Wide-Bay-Australia
My-State
P&N
Liberty
BOQ
Macquarie
Citibank

Acknowledgement received but no endorsement provided

Westpac
Bankwest

No response

The lenders displayed here in grey are those we are still waiting to hear from.  We will update you again once the bulk of these responses have been received.

CBA
St George

Home loan terms

Gone are the days when the only home loan on offer was a principal and interest arrangement, paid by the month over 25 years. Now, home buyers face a bounty of borrowing options, designed for different needs. Choosing the right one for your situation starts with understanding the jargon. Here’s our guide to what all the home loan terms mean.

VARIABLE LOAN: This is pretty much your stock standard principal and interest loan and still the most popular way for Australians to pay off their mortgage.

Repayments are calculated so that over the term of the loan — usually 25 to 30 years — both the original amount borrowed (the principal) and the interest payable over the term of the loan — are repaid in full by the end of the loan’s term.

The interest rate charged usually varies according to the movements of the official cash rate, which is reviewed monthly by the Reserve Bank. Until very recently, lenders tended to move rates up or down in step with the official rate announcements, but since the global financial crisis, most have become more cautious about passing on rate cuts in full.

Variable loans usually allow for extra payments and, if interest rates dip, you benefit from the savings. On the flip side, if rates rise, you will face higher repayments. If taking out a variable loan, it’s always best to leave some padding in your budget to cover any rate hikes.

FIXED RATE: This is where the interest rate is fixed for a period of time — usually one to five years. The main benefit for the borrower is certainty. The downside is being locked into a rate that may end up above the market if interest rates fall. Fixed rates are often favoured by borrowers who face a change in circumstances, such as having children.

SPLIT: A split loan allows you to have an each way bet on interest rates. You can choose to take part of your loan at a variable interest rate, which will move up or down in line with interest rate movements, and the remainder at a fixed rate, giving you certainty. If rates increase significantly, part of your loan and budget is shielded from the volatility. On the other hand, if they drop over time, you will still have to pay the fixed rate on your nominated portion.

INTEREST ONLY: Interest-only loans have their place in the market, especially among property investors. As the name suggests, you only pay the interest on the loan, usually for a set period of time. Property investors looking to maximise their tax deductions often opt for interest-only loans for the first few years after purchase because they can’t claim principal payments (we recommend you seek independent tax advice if you wish to explore how to maximise your tax deduction). Interest-only arrangements for a set period can also help home owners get through a credit crunch. However, interest-only loans won’t help you pay off your loan and the bank will want the principal paid off at some stage.

OFFSET: An offset account is essentially a savings account that is linked to a loan account. Instead of earning interest on your savings deposit, the funds are used to offset the principal of the loan account.

For example, if you have a home loan of $100,000, plus $10,000 in an offset account, the lender will offset your loan balance with your offset account balance, meaning they would only calculate interest on $90,000. Your loan repayment remains the same, but more of it is used to pay off the principal, reducing the life of your loan.

REDRAW: A redraw facility simply allows you to make extra repayments on your home loan and then access those funds if needed.

LINE-OF-CREDIT: A line-of-credit loan works the same as a credit card, but with a lower interest rate. A line-of-credit allows you to borrow up to a specified amount against the equity in your property, repay that amount and then borrow to the limit again — numerous times. You only pay interest on the amount you use.

You can usually choose to make principal and interest repayments or interest only payments. These loans are increasing in popularity, but require borrowers who want to pay off their mortgage to be disciplined around their expenditure, due to the easy access to funds.

CONSTRUCTION LOAN: These loans allow new home builders and renovators to get on with their projects without borrowing and paying interest on the full amount up front. Instead, progressive payments are made directly to the builder. Construction loans are generally provided for one to two years before reverting to a standard home loan.

LOW DOC: The name gives the impression there are no forms to fill in, but it actually refers to the fact these loans are for borrowers who have trouble providing documents to verify their income. Low document loans are often sought by the self-employed, casual employees or home buyers with a poor credit history.

NO FRILLS: These are generally loans with a lower variable interest rate than standard variable loans. The trade-off for the discount is less flexibility and fewer features. For example, no extra repayments and no redraws.

REVERSE MORTGAGE: Increasing in popularity as Australia’s population ages, reverse mortgages allow retirees to access the equity in their property to help fund quality of life or aged care needs. Borrowers have the option to draw down a lump sum or regular part-payments but are not required to make any repayments during the term of the loan. Instead, interest accrues and the entire loan, plus interest, is repaid on the death of the retiree (usually by the retiree’s estate), or when the retiree moves out of the mortgaged home permanently.

HONEYMOON/INTRODUCTORY: Aimed squarely at first homebuyers, honeymoon loans offer a discount for a limited period, usually 12 months. Borrowers are usually offered a discount on the standard variable rate for the honeymoon period, which means their rate will move up or down with the variable rate, or a discounted fixed rate, which stays fixed for the agreed period.

BRIDGING FINANCE: A handy product if you are buying or building a new home before the sale of your existing one. As the name suggests, it bridges the gap between two home loans. The lender takes security over both properties and lends against them until the sales on both are complete. The loans are generally short-term, and most borrowers only pay the interest during the loan period.

AFG Competition Index – November 2014

1 in 3 home loan borrowers refinance with non-major lenders

34% of borrowers who refinanced their home loans last month did so using a non-major lender according to AFG, Australia’s largest mortgage broker. AFG’s quarterly Competition Index shows that non-major lenders are strongest among borrowers seeking to refinance (as opposed to other borrower types – investors, first home buyers and upgraders).

Across all categories of borrowers, non-major lenders collectively accounted for 28.3% of all new mortgages processed. This is the highest such figure for non-major lenders since AFG began recording competition figures at the start of 2012 (Tables 1 & 2).

Suncorp had the biggest share of refinancers among non-major lenders, accounting for 10.3% of all home loans in this category. Suncorp’s 10.3% figure compares with 8.8% for Westpac in the same month. Macquarie Bank was the second largest in the category in October, delivering 7.5% of all refinancing home loans (Tables 5 & 6).

Mark Hewitt, General Manager of Sales and Operations says: ‘It is very encouraging from a competition perspective to see borrowers more and more willing to explore alternatives. Suncorp are a great example of this. Traditionally they have struggled outside their home state of Queensland however through delivering on a combination of customer value and service they have reached an all-time market share high of 8.2%’ The AFG Competition Index shows that, overall, major lenders accounted for 71.7% of all new home loans in October. Most notable in a period where overall major lender share fell was ANZ increasing its share to 17.6%, displacing CBA as the number one brand on the AFG panel.

Among non-major lenders Suncorp had the largest share in October on 8.2%, with Macquarie on 5.1%, ING on 3.1% and Bank of Queensland (BOQ) on 2.6%.

The AFG Competition Index shows that NAB’s repositioning of its broker-distributed Homeside brand, renamed NAB Broker in August, has benefited its share, which grew from 8.8% at the end of the last quarter to 9.8% in October.

The first home buyers market continues to be more fragmented, with major lenders accounting for 69.1% of all loans. The largest non-major lender, Keystart (10.3%) is WA Government-backed, with BOQ the largest commercial lender on 6.0% and Suncorp the next largest on 4.7%.

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Mortgage Index – November 2014

Record high for home loans in October

Investment loans ease – but first home buyers at lowest levels ever

AFG, Australia’s largest mortgage broker, processed more home loans last month than at any time in its twenty one year history, according to figures published today. AFG Mortgage Index shows that the company processed a total of $4.7 billion in mortgages last month, an increase of 9% over September (which was the previous all-time high), and 17% higher than in October 2013. For the first time in a single month, the company processed over 10,000 home loans (10,463).

But mortgages processed for investors slipped in every state. The most marked fall was in South Australia, where investment home loans declined from 36.4% to 30.5% month on month. In NSW, investment home loans eased from 49.7% to 48.7%, in QLD from 34.9% to 32.0%, in VIC from 37.2% to 35.9% and in WA from 32.2% to 30.2%. Nationally, investor home loans represent 38.7% of all mortgages processed, down from a peak of 40.3% recorded last month.

Mark Hewitt, General Manager of Sales and Operations says: ‘October has traditionally been one of the strongest months for property and the spring buying season is well and truly upon us, which is why we’re seeing the increase in owner-occupier loans. Of particular concern, however, is that first home buyer loans have fallen to unprecedented lows in places like New South Wales. If this continues we are going to end up with a whole generation of renters.’

Mortgages processed for first home buyers fell from its previous record low of 8.4% of all home loans in September to just 7.2% nationally. First home buyer loans have declined each month since June this year when they represented 10.8% of all home loans processed. NSW continues to have the fewest first home loan borrowers (2.2%), followed by QLD (4.7%), SA (7.3%), VIC (8.3%) and WA (17.9%). If WA was to be removed from the equation, the average level of first home buying on the eastern seaboard would be around 5% – about a third of the long term average.

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