Although the RBA did not lower the Cash Target Rate on 7 February 2012, ANZ and Westpac Bank have lifted their interest rates. Both Commonwealth and National banks are yet to announce any movement in their interest rate charges.
The Age Subsequently reported (11 January 2012) that the big banks were charging 8.25% on small business loans.
Australian Securities lowered their fixed interest rates to 7.00% for its Standard Victorian Residential properties, 8.25% on Commercial properties and 9.00% on Construction loans.
Australian investors fund Australian Securities. There is no lending margin. The borrower pays our investors their interest at an agreed rate. The investor pays 0.55% and the performing borrower pays a low 0.48% of the loan amount to Australian Securities to manage their specific loan.
Australian Securities has been in business since 1925 and is ond of Melbourne's oldest providers for residentail, business and development finance.
On 1 November 2011, the RBA in response to inflation figures falling to 2.5% (preferred range 2-3%) lowered the cash target rate by 25 basis points to 4.50%. ASL pre-empted the fall in rates on 15 September by dropping our fixed interest rates by 15 basis points for all investment, business and housing fixed interest loans who rolled over their loans with ASL.
ASL has applied the 0.25% fall to all variable interest loans from 15 November 2011.
Unlike the banks, ASL does not (when the cash target rate moves) differentiate between variable home, business or investment loans, nor does ASL increase variable rates higher than RBA cash target rate movements.
ASL standard one year fixed interest rates remain competitively priced against private lenders for investment and business loans.
Existing finance clients rolling over fixed interest loans with ASL will continue to receive the benefit of a 0.15% interest rate fall offered by ASL to all loans rolling over after 15 September 2011.
Tips to lower interest charges on rollover:
- ASL loans have a number of attractive repayment options which you can add or remove at any rollover date to vary your interest rate by up to 0.50%.
- Short term loans rolled over for a small fee also attract a lower interest rate for the 12 month fixed term.
Mortgage securities were one of only 11 investments the law once considered suitable for Trustee investments, and still remain an attractive option for those looking for a safe capital investment with a regular income.
The mortgage security is the collateral [or real estate] offered by a borrower to establish their credit worthiness and willingness to repay the debt with interest in an agreed time frame. The borrower should retain a margin, usually 33% or more, described as "hurt money" to provide a safety margin for risk tolerance for falling property value or delay to realise security if the loan defaults.
Australian Securities Limited's philosophy is that mortgage securities should not be pooled but held by the investor capable of registration in their own name, or with a group of other investors (contributory) for the proportionate amount of their investment.
Mortgage securities that do not comply with the above prudential requirements are not suitable for investment by conservative investors or SMSF investors.
Income is usually paid monthly in arrears, and fees paid to manage the mortgage security should be paid separately to the interest income earned on the mortgage security.
Historically, mortgage securities for residential (to 66% LVR) and commercial (up to 60% LVR) have low risk for non performance or loss of capital. The income is generally fixed for the term, for example 1 year at 9.00%, with interest collected and paid monthly, and the investor paying a 0.55% per annum management fee.
A monthly income of 8.45% per annum paid monthly is more attractive today than shares, which have been falling in value since 2007, and dividends with an uncertain future. In the SMSF environment when tax is low, income can be accumulated and reinvested to achieve a higher income from the compounding effect. A predictable growth and income return can be established that may be preferred to the uncertain gamble taken on the share market.
The GFC resulted in consumers reverting to their historical past pre 1985. Savings averaged 10% per person and investors, after a 20 year history of rises and falls in equity markets expecting high capital growth and average dividend income, now seek a stable capital investment and a fair return to provide for their investment strategy - most commonly retirement or future investment.
These changes are driven by consumer awareness and change in credit regulation which stimulates conservative investment and eliminates irresponsible use of credit.
It is important to understand the investment and the risks associated with the investment. if you do not understand the investment, the course of the income and the risks associated with ownership, you should not invest.
At the end of the day the investor holds bricks and mortar in a mortgage security - it can be seen and held. The security can itself be used to provide a rental income or be sold for value. No other investment can offer the same comfort.
The non performing ratio NPR is calculated by dividing the total loan amount for all loans in default by the total amount invested in current loans.
The NPR at 31 March 2011 fell to 1.1% which is the lowest level recorded in the 11 year history of the Australian Securities Income Fund.
This low level is attributed to tighter credit requirements implemented in 2008 which required all finance clients to have an accredited financial adviser in addition to an independent lawyer to act for them in relation to an ASL loan. We expect this level to continue if the economic conditions remain stable and more accountants and financial advisers become trained in credit advice and management.
Since 2000 all ASL managers are required to have a Diploma of Mortgage Lending and each year receive a minimum of 20 hours ongoing industry and onsite training. Loan entry requirements and ongoing monitoring by skilled and experienced employees has contributed to this record result.