August – RBA update
August – RBA update – 2.50% (cash rate unchanges, 5 August 2014)
Who would like to be in the shoes of our economists?
At the beginning of the month there were discussions about interest rates continuing to drop and evidence was seen with some of the majors and second tier lenders dropping their fixed rates, then only yesterday we read that we are to expect the cash rate to rise 150 basis points in 2015 (according to finder.com.au – Reserve Bank survey).
So whether there is to be one last cut this year or not, interest rate hikes are apparently on the horizon and look set to start rising very soon, so borrowers need to start preparing now before it’s too late.
If you too are confused, please call the office urgently while we still have access to great rates!
August RBA update – what you should know.
This month’s update is a case study about a young couple who didn’t have regular contact with their broker when they found out they were pregnant. They learnt of their predicament too late – after a lot of financial damage had been done.
If this month’s article resonates with you or anyone you know, please forward it on and tell them to call our office. We would be only too happy to assist them.
With your best interest in mind…..
Case Study – Prepare Financially before taking maternity leave
Samantha and Luke had been married for a few years and were both bringing in a comparable wage. They were equally contributing to their living expenses, including their mortgage and utilities. Luke paid the mortgage and Samantha paid the utilities, groceries and everyday living expenses (including a car and personal loan). In March 2011 Samantha found out she was pregnant – and they were both very excited! The following months rolled on very quickly and in November their beautiful baby boy arrived. Samantha’s paid parental leave started 6 weeks after her baby was born – not straight away. This was their first problem! The next problem was that the paid parental leave was $400 lower than her normal weekly wage – a substantial shortfall. The bills started to roll in, and they were struggling to pay them. Letters from the bank began to arrive with overdrawn account notices.
- the car loan was behind,
- the personal loan repayments were behind, and
- their credit card repayments were behind.
They tried to consolidate their debts but no one would help them as Samantha wasn’t working. They tried several different banks… Sadly, what should have been a very happy time soon became very stressful. The banks were constantly on the phone chasing for payments so Samantha decided she should go back to work. Four months after giving birth she had a meeting with her employer and asked if she could come back to her job on a part time basis to help cover their bills. The only option for her was to go back full time or there was no job to go back to. As she couldn’t go back to work full time, she had no choice but to resign. It took Samantha another 8 months to find a new job and by that time she had to settle for a full time position.
So what should they have done?
What Samantha and Luke should have done was call their mortgage broker to discuss their financial options during their changed financial circumstances. Unfortunately they no longer had their broker’s name and number to call because their previous broker had not stayed in touch with them and didn’t know about their important life change. Instead, Samantha and Luke went straight to the banks. This only resulted in knock backs – and of course their credit score was damaged in the process. If this young couple had a mortgage broker who knew them and their situation, there could have been a much different outcome.
Take action early!
Calling your broker is usually something that most people don’t think to do when they fall pregnant. When we meet up with couples like Samantha and Luke (often referred to us by our existing clients) they all wish they had spoken with a broker who could have advised them on their financial options. They now know they would most likely be in a very different financial situation if they did. Having been through such an experience these couples now tell all their friends to sort out their finances before going on maternity leave. The earlier the better!
Here are the facts
- Paid parental leave is currently $641.05 per week BEFORE tax for a maximum of 18 weeks only (4.5 months) for those who are eligible1.
- Most people, on average, take 24 weeks for their maternity leave2.
- Legally, your employer only has to offer you the same job back at the same number of hours. Therefore if you only want to go back in a part time capacity and there are no part time positions available, you may find yourself unemployed.
In January 2014 Australia’s unemployment rate was 6% – the highest level since July 20033.
That’s a pretty scary thought! As your finance specialist, we pride ourselves on helping you and your friends during times of financial change. The most important thing to do first is to have that conversation with us and let us know what is happening in your life so we can best assess your options. If you think it’s time to update us with your upcoming plans or changed circumstances then please enter our competition and complete the associated survey. This will tell us what is going on in your life so we can best assess how we may be able to help. There’s a range of informative topic sheets you can request while you’re there – PLUS you get a chance to win a trip to New York at the same time! We look forward to hearing from you – AND your friends.