“What if Christmas, doesn’t come from a store. What if Christmas…perhaps…means a little bit more!” ― Dr. Seuss

Here in Australia we have a lot to celebrate and be thankful for this year. After a tough couple of years of pandemic-induced uncertainty, we are opening up with travel back on the cards, we can also catch up with friends and family and we have a path back towards normality. As the festive season approaches, we may also need to consider how this celebration too might change.

It hasn’t all been doom and gloom. Gratitude has been a real focus to the year, and as a result, many people are shifting away from the silly season’s materialism and excess to reassess what Christmas means to them.

Our “new normal” festive season can be one that is memorable and joy-filled, whether you celebrate this holiday or just enjoy unwinding at the end of the year.

Expressing gratitude

Being thankful for what we have is important; especially so in a year in which bad news may have overpowered the good.

Rather than merely being a buzzword, gratitude has been shown to reduce depression, anxiety, and stress. Whether it’s around the table at Christmas or in the lead up to the holidays, tell your loved ones what you’re thankful for, as this can inspire them to also reflect on this. It can also help reframe the year from being one of hardship to also having contained moments of happiness and opportunities.

Creating memories

As many of us have been separated from loved ones due to restrictions, the holidays provide an opportunity to reconnect in person. While for many of those who experienced prolonged lockdowns it’s exciting to plan a family road trip or a big indoor gathering, what truly matters is the time you spend with those you care for.

Perhaps even new traditions can be formed as you create memories together. Rather than focussing on the presents around the tree, maybe celebrate being in the presence of those you care about and make the festive season about wonderful, shared experiences.

Supporting others

Christmas time is synonymous with extending goodwill to all – and this year there are more people who are doing it tough as a result of the pandemic and many businesses who are struggling to get back on their feet.

Give a helping hand to those who have fallen on hard times by volunteering some of your time to a worthy cause (such as a free meal service to those in need) or donating money if you’re able to. These gestures can also reaffirm your understanding of what you have to be thankful for.

Being thoughtful about supporting businesses that have been doing it tough, can also make a big difference.

Reducing overspending

Retail sales over the festive season are predicted to boom, with overall spending estimated to come in at $58.8 billion, as we open our pockets and spend, spend, spend. This represents an increase of 11.3% on pre-pandemic conditions.

While it’s thrilling to be hitting the shops, it’s important to watch what you are spending. Manage your festive shopping spree by setting and then sticking to a budget. Don’t leave gift buying to the last minute when you’re more likely to miss bargains or to panic buy. Also keep an eye on your credit card use, or buy-now-pay-later schemes so you don’t have a debt hangover in the new year to worry about.

As this year wraps up, we would like to express thanks for your support during 2021 and wish each and every one of you a safe and happy holiday season.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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Stay up to date with what’s happened in Australian markets over the past month.

As November drew to a close, and we look towards the end of the year, all eyes were on the new strain of the coronavirus, Omicron.  Click here for our Dec update video.

Please get in touch if you’d like assistance with your personal financial situation.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. Please consult your adviser, finance specialist, broker, and/or accountant before making decisions using this information.

For those of us who’ve been in and out of lockdown over the past 20 months, this has meant a significant shift in the way we shop, not only physically, but the way we pay for our goods has changed too.

For many years now EFTPOS, cash, and credit cards have been the most common ways to purchase items. However, over the past five years we’ve seen alternate payment services like Buy Now Pay Later (BNPL) emerge. They’re becoming increasingly popular, so much so, that the total amount of credit extended under buy now pay later arrangements has almost doubled.

What is BNPL?

Buy now pay later services allow you to purchase items and take them home immediately – if purchased in-store – and pay them off in instalments (usually four fortnightly payments). It’s important to recognise that this service is still a credit facility; however, you won’t have to go through the same credit checks as you would if you were applying for a credit card.

BNPL services do not charge interest but if you do not meet the required repayments, you might incur a fee and this could have an impact on your credit rating which may then be an issue if you apply for a loan in the future.

Keep track of your spending

Around this time of year, we’re usually counting down the days until we can take a break from work and we look forward to spending more time with family and friends.

During this time, our spending tends to increase too, and the repercussions can end up lasting longer than the holiday period.

Buying gifts for family and friends can be expensive, even if you’re spreading out your payments by using BNPL services, and so can social occasions like celebrating the end of the year with work colleagues or family and friends.

Try to plan early and set yourself a budget, working out how much you can afford to spend will help to ensure you don’t end up with a financial hangover in the new year.

Create a budget

A good place to start is to work out which family and friends you’d like to buy a gift for then set a limit for each. If you’re unable to buy a gift for everyone, why not suggest a Kris Kringle; that way you can purchase one gift and perhaps spend a little more than you normally would if you buy an individual gift for each member of the family.

Do the same with social activities. Try and plan as many outings as possible and set yourself a spending limit for each. There are always going to be occasions where you’re unable to plan ahead so creating a buffer within your budget allowance could help pay for those unexpected activities. It could also help if you do overspend on gifts.

Plan ahead and don’t blow the budget

Manage your time effectively. Our time is such a precious commodity, we never feel like we have enough. As we approach the holiday season, try to plan in advance as much as you can. The moments we feel rushed are when our spending levels tend to increase. For example, last minute gifts, higher priced tickets and more expensive shipping so our delivery arrives in time. You’ll also have the added bonus of eliminating some of the holiday stress, with more time to relax and enjoy with friends and family.

Having fun this holiday season will be a priority for most of us this year, especially if this is going to be the first time you’ve seen loved ones in quite some time but making sure you don’t go overboard with your spending should be an important factor too.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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Australia’s thriving property market has recovered so swiftly since the brief pandemic-induced recession of 2020, that authorities have stepped in to pull the reigns on runaway real estate prices. As a result, lenders have been asked to tighten serviceability criteria.

Nationally, dwelling values are up 20.3% higher over the past 12 months, every capital city experiencing significant growth across the board. Melbourne, despite ongoing lockdowns dampening the market, still increased by 15%.

That’s where the Australian Prudential Regulation Authority (or APRA) comes in. On October 6, it wrote to lenders announcing an increase to the minimum interest rate ‘buffer’ it requires them to use when assessing the serviceability of home loan applications. APRA told lenders that from November 1, they must assess new borrowers’ ability to meet loan repayments at an interest rate at least 3 percentage points above the loan product rate – a 0.5 % increase to the previous 2.5 % buffer.

Month-on-month change in dwelling values

What are macro-prudential measures?

This is a big picture measure taken by one of the regulators [the Council of Financial Regulators includes; APRA, the Australian Securities and Investments Commission (ASIC), the Reserve Bank of Australia (RBA) and The Treasury] to secure financial stability for both lending institutions and borrowers. If APRA, in this instance, thinks the current lending system is unsustainable then it will step in to protect banks’ profits and the stability of the whole banking system, while also not letting borrowers get in over their heads.

Why did APRA do it?

The early October announcement by APRA was a “targeted and judicious action” designed to reinforce the stability of the financial system according to chairman Wayne Byres. “In taking action, APRA is focused on ensuring the financial system remains safe, and that banks are lending to borrowers who can afford the level of debt they are taking on – both today and into the future,” he wrote in a letter to lenders.

“While the banking system is well capitalised and lending standards overall have held up, increases in the share of heavily indebted borrowers, and leverage in the household sector more broadly, mean that medium-term risks to financial stability are building,” he added.

More than one in five new loans approved in the June quarter were in excess of six times the borrowers’ income and APRA’s fear has clearly been that housing credit growth will run ahead of household income growth. “With the economy expected to bounce back as lockdowns begin to be lifted around the country, the balance of risks is such that stronger serviceability standards are warranted,” Mr Byres said.

What difference will it make to you?

Overall, such a small tweak will probably not make a huge difference to average borrowers who may not have been borrowing at their full capacity anyway. However, for those who are stretching their borrowing budgets to almost the last dollar, such as first-home buyers struggling to meet rising prices, this move could be significant.

Ultimately, APRA has stated that the change will cut the maximum amount available to a typical borrower by approximately 5 per cent.

• Borrowers who were previously approved for a $500,000 loan would now be able to borrow $475,000
• Anyone with the green light to take out a $1 million mortgage would now be looking at $950,000

The impact this will have on prices or the current sky-high demand throughout most markets is yet to be determined as anyone who obtained a three-month pre-approval towards the very end of October would be under the previous 2.5 % serviceability buffer well into the new year. These changes will affect investors and owner occupiers in differing ways.

The changes are likely to have more of an impact on the investment segment of the market, as investor rates are higher than owner occupier mortgage rates. APRA also highlighted in their announcement that investors tend to borrow at higher levels of leverage and often have other existing debts, which would also be subject to the increased serviceability assessment.

What other changes are on the horizon?

Although APRA’s recent announcement will unlikely make a huge impact on demand for credit or even push down prices, it may well be a sign of future changes. While the announcement may seem like a subtle change to housing lending conditions, there may be more tightening to come as the level of housing credit and household debt are monitored, the high debt-to-income ratios being a focus.

In his letter to lenders, Mr Byres highlighted that if new home loan lending led to high debt-to-income ratios, a statistic expressing a borrower’s pre-tax income divided by their total debt levels, APRA “would consider the need for further macro-prudential measures”.

To find out how the tightened lending criteria will impact your borrowing power, get in touch with us today.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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Stay up to date with what’s happened in Australian markets over the past month.

All eyes were on the September quarter inflation figures in October, as speculation mounted that the Reserve Bank may be forced to raise interest rates sooner than planned. Click here for our November update video.

Please get in touch if you’d like assistance with your personal financial situation.

Suite 2, 1 Railway Crescent
Croydon, Victoria 3136

Telephone: 03 9723 0522

Email: integrityone@iplan.com.au

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