A MESSAGE FROM AUSTRALIAN MONEY MENTORS ON PREVENTING THE CORONAVIRUS FROM INFECTING YOUR FINANCES
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We know, we know – you don’t want to hear a single thing more about Corona unless it involves an afternoon out in the sun with some friends featuring the beloved beer brand – but unfortunately, there are a few pieces of COVID-19 information that we just can’t sweep under the rug.
- The economic impact of COVID-19 is large, and will continue for some time.
- The economic impact will impact your wealth, directly and indirectly.
- The opportunities to continue to prosper during this period.
Navigating your options whether it be restructuring lending applying for hardship etc. can be for some overwhelming and time consuming.
HERE’S AN OVERVIEW
We are only seeing the beginning of the changes that are on the way, both on the health front and the wealth front. There are going to be issues far more complex than lack of groceries at your local supermarket. In fact, we’ve already seen them taking effect within different industries.
In just a few short weeks since COVID-19 has hit Australia, we’ve seen thousands of jobs vanish, profits slashed and normal bills such as rent, mortgage and utilities falling into arrears.
This is the tip of the iceberg, and we will not be the Titanic! We’d rather be the lighthouse that stops you from crashing into the rocks.
We know this sounds scary, but we don’t need to panic. So what do we need to do? Look up and look ahead! Plan and strategise to make sure there is a future. Here at Australian Money Mentors we have never been in the game of people living week to week. We are not interested in simply ‘getting by’, and we are definitely not interested in our customers failing when it comes to their finances.
So, don’t delay – now is the best time to implement a plan to ensure you’ve got optimal control over your financial situation during these uncertain times and into the future.
Areas we can discuss and give you general information on:
- Taking advantage of the banks offers to defer your payments (please note this is not a freeze of interest as it will be added to your loan balance)
- Work towards retaining / creating an emergency fund of easily accessible cash
- Restructure your lending
- Consolidate and negotiate debts
- Change from Principle and Interest loans to Interest Only Loans
- Check your contracts to see if you are entitled to a repayment holiday
- Review and create budgets
- Apply for hardship if needed
- Credit Card Balance transfers
- Accessing redraw
- Unsecured business lending proposed by government
EXAMPLES OF MEASURES ALREADY IMPLEMENTED
The Australian Government has announced an economic response to date totaling approximately $189 billion
- Increasing the instant asset write-off
- Backing business investment
- Boosting cash flow for employers
- Supporting apprentices and trainees
- Stimulus payments
What did the RBA announce?
The board reduced the cash rate target to 0.25% – adding that it will not increase the cash rate until progress is made towards full employment.
A funding facility for banks, with particular support for credit to SMEs – The facility is for at least $90bn but there will be extra funding for those banks which increase lending to small and medium businesses.
The major banks have outlined how they are supporting those affected by the coronavirus pandemic and its economic impacts, including mortgage repayment relief and interest rate reductions (see below examples).
ANZ is the only major bank to announce reductions to its variable home loan rates, reducing rates across all products by 15 bps, effective from 27 March 2020.
The bank will also introduce a two-year fixed rate of 2.19 per cent for owner-occupiers paying principal and interest.
For business customers, ANZ will:
- decrease variable interest small business loan rates by 25 bps, effective from 27 March 2020;
- provide temporary increases in overdraft facilities for 12 months; and
- reducing new two and three-year fixed rates for secured SME loans of up to $1 million by 80 bps to 2.59 per cent, effective 3 April 2020
The Commonwealth Bank of Australia (CBA) has also announced a number of relief measures for households and small business but has not reduced variable mortgage rates.
CBA home loan customers can access the following:
- cuts to one, two and three-year fixed owner-occupied principal and interest (P&I) loans by 70 bps to 2.29 per cent – effective for both new and existing customers from 1 May;
- automatically reduced repayments for all variable P&I home loan accounts (to the minimum required within the borrower’s loan contract), effective from 1 May. However, borrowers will have the opportunity to opt out if they wish to retain their current principal repayment levels; and
- the option to defer loan repayments by up to six months.
For business customers, CBA will:
- auto-enrol 76,000 businesses into loan deferral arrangements for up to six months;
- reduce rates on business loans by 100 bps, in addition to the 25 bps reduction announced on 3 March, effective 3 April;
- participate in the RBA’s new term funding facility, aimed at providing low-cost credit to businesses; and
- continue to offer a range of measures to provide further assistance to customers facing financial hardship.
For depositors, CBA will:
- increase 12-month term deposit rates by 60 bps to 1.70 per cent for new and existing CBA personal customers, available from 19 March 2020 on balances from $5,000 to $2 million; and
- increase eligibility criteria for personal overdrafts, available online or through the CommBank App.
National Australia Bank (NAB) has also announced that it would extend the offering to home loan customers experiencing financial hardship.
Mortgage customers will be able to pause home loan repayments for up to six months, including a three-month checkpoint. Customers also have the option of reducing repayments on their variable rate home loans.
In addition to suspension of repayments for home loan and business customers, NAB will:
- cut 200 bps from interest rates on new loans and all overdrafts on its flagship digital business product QuickBiz, effective March 30;
- reduce variable rates on small business loans by 100 bps, effective March 30;
- reduce fixed home loan rates by up to 60 bps; and
- introduce a 10-month term deposit rate of 1.75 per cent for depositors.
Meanwhile, Westpac will offer customers who have lost their job or suffered loss of income as a result of COVID-19 loan deferrals of up to three months on their home loan mortgage repayments, with extension for a further three months available after review.
As with all ABA members, it will also offer small-business customers repayment holidays of up to six months.
Westpac said it will also:
- reduce overdrafts by 200 basis points for new and existing customers, effective Monday, 6 April 2020
- reduce variable interest rates on small-business cash-based loans by 100 bps, effective Monday 6 April 2020
- introduce a 2.29 per cent fixed rate home loan for one, two and three years for owner-occupied customers on P&I repayments with a Premier Advantage Package, effective Friday, 27 March 2020
- introduce a 12-month term deposit of 1.7 per cent. This will rise to 2 per cent over eight months for Australians aged 65 years and over (up to $500,000 per customer) – effective Friday, 27 March 2020.
In addition, Westpac announced a $10-billion home-lending fund to assist more Australians into home ownership.
Non-majors, including Bendigo and Adelaide Bank, Macquarie Bank, Heritage Bank, MyState etc, have also released relief packages for home loan and business customers.
Regardless of who your lender is, contact us directly to see what relief packages can apply to your personal situation.
THE LENDING DOORS ARE OPEN
They are open for business, to keep you in business. With the RBA’s actions of injecting millions of dollars into the economy, they will encourage economy stimulation through lending activities.
But most of all, we understand that each individuals’ circumstances are different, and we will help you through solutions based on what is best for you and your goals.
We wish you all the best of health.
Call us on: 03 9841 8111 or email us on: firstname.lastname@example.org today.
The Team at Australian Money Mentors
Ph: 03 9841 8111
Disclaimer: This document highlights the current information currently available and we have prepared this to present key findings to help raise awareness to the public in simplified terms. This does not take into account the client’s exact personal situation or financial needs. Please read through all documents publicly available or information provided by your own trusted information sources to form a well-rounded and unbiased decision. We always recommend seeking independent legal and financial advice before proceeding with an opportunity and or to attain financial advice. We do not and cannot make any guarantees about the completeness, reliability or accuracy of this information and information can change at any time. Any action you take on this will be at your own risk and we will not be liable for any losses or damages in connection with this announcement. Please Note Australian Money Mentors may refer consumers’ finance questions to Victorian Financial Solutions Pty. Ltd. who is the holder of Australian Credit Licence No. 431349.