in this issue
> We’re getting financially savvy at a
younger age: survey
Taking control of your finances:
considering your options
The Big 4 banks recently increased rates over and above the
Reserve Bank of Australia’s movements, triggering a political
storm fuelled by public outcry.
Second tier lenders have also started
to increase rates outside the RBA 25
basis points creating an interesting
dilemma for our government.
Pressure has been building for the
government to put some measures in
place to improve price competition
that has almost disappeared since
the Global Financial Crisis. Treasurer
Wayne Swan has announced his
banking reform, which includes no
exit fees for loans established after
July 2011. At this stage it’s unclear
what effect this package will have on
the market.
With the latest round of interest
rate rises from the major banks we
are finding many borrowers are
confused, not sure what to do and
some are struggling to meet the extra
repayments. We are solution-focused
and a review right now of your loan
facilities by a Mortgage Professional
at Club may assist you with an
improvement in your day to day cash
flow and you could be pleasantly
Taking Control: In a Snapshot
What are we likely to see in the coming
months?
• P otentially more interest rate rises driven by
banks (independent of RBA)
• New rules around exit fees to encourage
consumers to look around
• Continued reporting of huge banking profits
club newsletter summer 2010
> Capital Gains and Rental Markets
Over 5 Years
> Your Monthly Word from Club
Money Management
surprised with the outcome.
In the last few weeks, some lenders
have announced that they are
taking the lead in doing more to
give customer’s choice and to help
them manage their finances in this
uncertain interest rate environment.
To sweeten moves between lenders,
some banks have officially abolished
all deferred establishment fees (or
exit fees) effective immediately.
Discounts and subsidies are also
being offered to reduce ‘switching
costs’ for new and existing
customers.
To protect against further rate rises
by the banks, some non bank lenders
are also introducing products where
rate changes are linked directly to
the RBA cash rate, offering their
customers certainty and competitive
pricing, with all the major features of
a standard home loan.
Many of the banks pretty much
believe that most of their borrowers
What should you do?
• G et in on the action. Maybe buy some bank
shares and share in any growth / dividends.
• Shop aggressively to ensure the most
appropriate funding to suit your needs. Club
Financial Services, naturally, can assist.
> New responsible lending legislation
good for the industry and you
will just accept the interest rate
increases and do nothing.
We at Club think there is a smarter
thing to do and at our cost we can
quickly review your situation to
ensure you are getting the best there
is to offer.
We recommend people take part in
an annual home loan health check.
The decision to refinance your
mortgage may not be an easy one
and should be made after taking
into account all the costs. During
our home loan health check we can
explore whether your mortgage is
the most appropriate for your current
situation, whether cash flow can be
improved and provide the most up
to date information on new products,
lender fees and how these affect you
personally.
We are solution-focussed, so we
invite you to give us a call.
summer 2010
Welcome
Recent interest rate rises by
lenders outside RBA decisions
have prompted many customers to
look to improve their cash flow by
considering switching lenders. In
this newsletter we discuss the value
of reviewing your current situation.
We have recently conducted a
client financial-lifestyles survey
and we’re happy to report the
results have shown our young are a
financially savvy bunch.
We hope our investor (and
potential investor) clients benefit
from the inclusion of a snapshot
of the capital gains and rental
markets over the past 5 years.
Club Money Management
this month considers income
protection insurance and questions
why only 20% of workers have it.
New responsible lending
legislation has recently been
introduced and whilst these
practices have been standard
within Club for some time, we
thought it beneficial to inform
you of the standards now required
across the industry.
As we head into the festive season,
we’d like to take this opportunity
to thank you for your support over
2010, and to wish you and your
family a safe and happy Christmas
and New Year.
regards,
Russ Holland
page 1
We’re getting financially savvy at a
younger age: survey
Whatever your stage in life, managing your finances
is always important and it appears this message
is coming through strong from a younger age,
according to our recent survey. (Thanks to all of our
clients who took part)
As you move through life your priorities change,
and there are lessons that can be learnt at each
of these stages. A key financial life lesson is the
sooner you get started, the sooner you’ll be reaping
the rewards.
It appears people are heeding this advice, with 77
per cent of respondents indicating they purchased
their first home before they were aged 30, and the
results also showing the younger generation have
purchased their first home earlier in life, being a
very financially savvy bunch.
Whilst many younger people may struggle to
save as they meet bond, rent and general living
expenses, it’s also common for people in their
20s to still be living with their parents. With few
outgoing costs they often have quite a high
disposable income, making it the ideal time to get
a foot up on the property ladder and our survey
results showing that many are doing just that.
Our national survey was conducted in Victoria,
South Australia, New South Wales, Queensland
and Australian Capital Territory, with 95 percent
of respondents having a loan of some variety (76
per cent a home loan, 44 per cent an investment
loan, 13 per cent a personal loan and 5 per cent a
business loan).
club newsletter summer 2010
This data shows the younger generation keen to flow as well as an appreciating asset, rather than
get a foot up the property ladder, which it is not considering the more traditional retirement
surprising given the recent First Home Buyers planning strategies.
Incentives. However, whilst grants have existed
Whilst showing they are financially savvy, people
many have argued that these have been offset
in their 20s have often been typecast as being
by rising property prices, meaning the average
focussed on wanting gratification today and paying
loan commitment for first home buyers has also
for it tomorrow, building up lots of credit and
increased.
personal loans.
While the survey results look positive for the
This assumption was somewhat confirmed with 22
younger generation, first home buyer incentives
per cent of people in their 20s having a personal
are now significantly reduced and housing data
loan, significantly higher than any other age group
recently released by the Australian Bureau of
in the survey.
Statistics shows a weakened demand by the first
home buyer. Although our survey shows the younger generation
to be a financially aware bunch, our advice to
Perhaps the biggest figure to support our younger
people in their 20s, is to identify their financial
generation being financially savvy, is that as well as
goals, to ensure they are making decisions now that
purchasing their first home younger, they are also
put them in a strong financial position in the future.
getting early investment confidence, with 35 per
Short-term goals (five years or less) may include a
cent of respondents aged 18-29 and 44 per cent of
wedding, honeymoon, furniture, a new car or an
all respondents under the age of 40 having already
investment property, medium-term goals could
started an investment portfolio. This contrasted
include owning a home and financing children’s
significantly to the results of respondents aged
education and long-term goals may include
over 40 years of age, of whom just 13 per cent had
retirement and travel.
started their investment portfolio by the age of 30.
While some of these timeframes may seem a
With recent gains in property, building a property
long way off, being able to plan for the short,
portfolio appears an increasingly common strategy
medium and long term will make your financial
for wealth creation.
goals far more achievable and ensure the younger
Only 15 per cent of these respondents indicated generation remains financially savvy throughout
that they had commenced retirement planning. their life.
It would appear the younger generation believe
property investing is an excellent source of cash
page 2
Capital Gains and Rental Markets Over 5 Years
During the five years to September 2010, the
Australian residential property market has
experienced a variety of conditions, modest
growth conditions in 2005/06, rapid appreciation
in 2007, falling values in 2008 followed by
another strong growth phase in 2009/10. Despite
the range of conditions over this five year
period, overall property values have increased at
the average rate of 7.1% year on year.
Property values across the combined capital cities
have increased by a total of 40.5% for houses
and 42.2% for units over the last five years. On
an average annual basis this represents growth
of 7.0% for houses and 7.3% for units. In dollar
terms, house values have increased by a total of
almost $140,000 over the last five years and unit
values have increased by approximately $123,000.
Five years ago, house values were 18% greater
than unit values and as at September 2010 the
differential was recorded at 17% indicating that
the price differential has remained relatively
consistent over the period. With median house
prices currently recorded at $485,000 and units
at $415,000, affordability factors have likely
contributed to the superior performance of units
to houses over the period.
Over the same period rental rates have also
ramped up and, similar to the capital gain
performance, the growth has not been uniform
from year to year. Between September 2005
and the end of 2008, rental rates were typically
trending upwards at the rate of almost 11% year
on year. In 2009 capital city rents increased by just
0.9% and we are now seeing the first evidence of
rental growth once again returning to the market. $127/week for houses and $135/week for units. obtain this information on a state by state basis.

Rental rates have increased by a total of 41.2%
for houses and 46.6% for units over the last
five years. Note that the total growth in rents is
slightly superior to the total growth in property
values over the period. Given this growth the
dollar value of weekly rents have increased by
Whilst the gap between house values and unit
values has remained quite consistent, the gap in
rental costs has closed markedly. During September
2005, rental rates for houses were 6.7% greater than
unit rents, today the gap has closed to just 2.8%.
Please feel free to contact us if you’d like to
Overall the results highlight the virtues of having
a long-term hold strategy in relation to property
purchases with property values, rents and
subsequently yields having historically proven to
increase over time.
Source of information: RP Data

Your Monthly Word from Club Money Management

In this month’s word from Club Money
Management, we are concentrating on Income
Protection. Why? Because insurance is needed
more for income than for houses!
So why is it that only 20% of workers have
income protection? We really aren’t sure.
Everybody that has seen a Mortgage Broker will
have been advised to see a Financial Planner, but
it’s clear that not everybody takes this advice.
Most of us don’t think twice about insuring our
homes, but we are far more likely to be out of work as
a result of sickness or injury for more than 3 months
than we are to see our homes go up in flames. Without income protection in place, many
individuals will find they have to rely upon
Think of it this way ………… If you had a cash
Centrelink payments for the rest of their lives.
machine in your living room that gave you
Would you be able to maintain your current
$50,000 per annum, would you insure it against
lifestyle?
loss, damage or theft? Imagine if anything
happened to it and it wasn’t insured. That cash We have discussed in recent editions the facts
machine is you. and figures regarding incapacity, illness, loss of
earnings, and many more, so maybe now is the
Income protection is a must for someone who
time to stop thinking “it won’t happen to me”.
is not rich, as is Life/Death insurance for anyone
with a family and debt. Don’t get caught out. Get in touch.

club newsletter summer 2010 page 3


New responsible lending
legislation good for the
industry and you
The lending landscape changed on 1 July, 2010
for the better. The introduction of new responsible
lending criteria on this date sets a best practice
benchmark for mortgage brokers across the board.
Whilst these practices have been standard within
Club Financial Services for some time, we thought
beneficial to let you know what standards are now
required across the industry.
While the most successful mortgage broking
companies, including Club Financial Services, have
had their own minimum standards in place for a long
time, there has been too much scope for variation
across the industry.
The new tighter regulation is an extremely positive
step for the industry and now makes brokers more
accountable than ever before, which is great news for
borrowers.
The biggest change now required of brokers is that they
must show they have made enquiries to determine
whether a loan is ‘not unsuitable’ for the client.
While the phrasing might sound a little strange,
it requires the broker to investigate the client’s
repayment capacity and to prevent people from
obtaining loans that they can’t really service.
Satisfying this responsible lending requirement
club newsletter summer 2010
coffs.clubfs.com.au
Club Financial Services
Coffs Harbour
27 Gundagai Street
Coffs Harbour NSW 2450
T: 02 6652 7444
F: 02 6652 4752
E:info@coffs.clubfs.com.au
will be a three-stage process, starting with making
‘reasonable’ enquiries into a borrower’s needs and
objectives. Next, brokers must investigate the
borrower’s financial situation - and take reasonable
steps to verify that situation.
Most importantly, brokers must be able to
demonstrate that the client can repay the loan
without experiencing substantial hardship – which
can vary from one person to another.
As defined by the new legislation, “substantial
hardship” occurs when a person will experience
substantial hardship if the loan can only be repaid
through the sale of assets, such as the client’s home,
rather than through income.
You may have recently completed our Client Needs
Analysis which is a process set up so that we can
greater assist with all your finance needs and to
ensure we meet all of these legal requirements.
We are excited that the best practice we have had
in place for some time is now to become industry
standard, and we will continue to strive to be a IMPORTANT: The material contained in this
Newsletter is merely general commentary and
pioneering company, that provides transparent and
should not be regarded as constituting financial
tailored service that educates our clients about the advice nor relied upon in making any financial
decision. The circumstances of each particular
best options for them, while also meeting all of the person vary and you should always seek advice
legislative requirements. tailored to your particular needs before you make
any decision.
page 4