And this is more great news for many mortgage holders. 

After all, who wouldn’t love the thought of their repayments being reduced since last October by more than $150 per month on an average $300,000 standard variable loan take over thirty years, if the lender passes another .25% rate cut on in full.

To put this into perspective, let’s look at what $150 per month could offer an ‘average’ borrower:

1. If that money continues to be paid into the mortgage at your pre-November repayment level (providing your loan allows for this) it can potentially save you more than $90,000 in interest and pay the loan out considerably earlier. Definitely the preferred option to maximise the effect over the long term.
2. Outstanding debts – paying off a credit card or any other accrued debt can be an empowering move and allows you to then concentrate on reducing your mortgage as your sole financial obligation.
3. If the monthly savings are accumulated over a quarter, $450 may mean you can pay for some minor improvements to your property such as repairs, painting, landscaping or even a room makeover.
4. Energy bills/council rates/insurances– many families are not immune to these bills adding up to more than $450 per quarter so imagine being able to pay that bill and re-direct your efforts to pay down extra debt somewhere else.
5. Holidays – cumulatively, $150 per month adds up to $1800 over a year which is enough to pay for a holiday for one/two weeks depending on when/where you holiday and how many people are travelling. If the only holiday you can  currently is likely to go on your credit card, imagine paying for it in cash.

It’s not a matter of spending the money before you get it – because you already have the money.

The point is you need to see any mortgage relief for what it is – i.e. less pressure on your hip pocket, allowing you to re-allocate those funds and make your financial situation more effective.

And much of this is really just a matter of working with what you already have, by restructuring your existing arrangements so they work more effectively for you.

Too often we’re so entrenched in our day-to-day routine we don’t realise how much each of our habits are collectively costing us – and then we think we’re too busy to take the time out to change things.

However, if you find you’re constantly finding you’re wanting more bang for your buck – you need to step off that daily treadmill for long enough to review the areas that most impact your finances, make long term changes to free up more cash and take up the opportunity to improve your financial plans.

These are my top twelve resolutions for 2012: 

1. Develop a long term financial plan if you haven’t already – or improve upon your existing one
2. Take full advantage of the two recent rate cuts by paying more off your mortgage than you are required to, saving considerable interest over the life of the loan.
3. Speak to your lender. This can allow you to see if there is a more appropriate loan for your circumstances that you can switch to – alternatively, take the time to shop around.
4. Stop complaining about the lack of decent service from any of your service providers and do something about it. Sometimes providers can become complacent when they’ve had your business for a long time – so if you feel like just another number, see what else is available.
5. Address any remaining credit card debt. Review all your credit arrangements, particularly those where you are struggling to pay the interest and consider consolidating the debt into your mortgage if you can. Once this is done – change your credit habits and obtain a debit card to replace your credit card.
6. Draw up a realistic monthly budget for all spending including essential and discretionary. This will allow you to take control of your spending, monitor where all your money goes and where you may be able to make further improvements
7. Combat rising electricity costs by reviewing your habits. Turning appliances off when not in use, reducing use of dryers and updating old non-energy efficient appliances will all contribute to lowering your bills.
8. Review your water use as well. Small-and-often changes such as having shorter showers, washing only when you have a full load and using water-saving devices in the garden will all have a cumulative effect of saving you money over time.
9. Review your phone/internet plans – there are so many cheap bundled plans among phone and internet providers so look around, but ensure you’re always comparing apples with apples.
10. Review all your insurances – shop around among providers each year for all types of insurances including mortgage, health, life, car, house and contents. Premiums do change year on year, even with the same provider, so this exercise should be done annually anyway.
11. Review how you holiday. If you always opt for the same style holiday, consider other options as an alternative, particularly if you can save money by doing so.
12. Review your transport methods. If you have two cars, ask yourself do you still need two cars or would one of you be better off walking or cycling to work. Or can you feasibly catch public transport more often so you’re not paying out for petrol, parking, registration and insurance.

I love the trimmings, the trappings, the ribbon and the wrappings. So at the risk of not wanting to sound like the Grinch who stole Christmas…..

While you’re contemplating how much turkey/seafood/pudding you’ve consumed over the Christmas period – why not use some of that downtime to do an audit of your personal finances?

And I don’t just mean reviewing your mortgage, but looking at your overall debt position – including all your credit arrangements including cards and any other loans as well as all of your spending habits.

A good way to then make it real is to draw up a chart, listing all your incomings and outgoings in two columns – even colour code all the sub-categories if it makes it easier.

Once you list everything down and it’s all in front of you, the picture will become so much clearer about where all of your money is actually going.

A five step plan can then be the difference between how you’re feeling about it all  now – and how you can feel this time next year:

1. Detail what your goals are for the year(s) ahead and what changes you can make now within your current situation to reach them.
2. If you’re still carrying multiple debts, investigate whether you may be better off to consolidate some of those debts into your low interest mortgage.
3. Determine what areas of your spending are ‘essential’ and what are really ‘discretionary’ – then get someone close to you to see if they agree. You may be surprised at how you view things.
4. Look at the items on each list and research how you can make improvements in terms of cost–cutting to free up some more cash.
5. Work out how you can best utilise that extra cash: e.g. direct it towards your mortgage, pay down other high interest debt, or set it aside for that rainy day.

We make all sorts of lists for Christmas – and that’s just one day of the year. So why not make a financial list that sets you up for the year ahead and well into the future.

Just a bit of festive food for thought…..

MERRY CHRISTMAS.

Because it was back in their day that a bank not passing on a rate cut was almost the rule, rather than the exception.

And with interest rates getting up to eighteen percent around that time, that was a whole lot of sweat going on!

So that generation can certainly add some perspective to what’s happening in the current times.

But there is one difference now. Thanks to competitors such as non-bank lenders, credit unions and building societies continuing to be a force in the mortgage marketplace, rate cuts are now more routinely passed on in full to borrowers.

And the reality is, this pattern now is largely due to the continuing existence of alternative lenders, combined with people exercising their right to choose.

After the 1990’s, benchmark rates came down by almost two percent after non-bank lenders such as Resi entered the market and have remained lower largely because our sector of the market continues to be around.

Sure – the big banks will continued to be pressured, whether it’s by government, borrowers or through the existence of other alternative lenders to more carefully consider their decision on rates, so that won’t change.

But at the end of the day, borrowers are now in a position where if they don’t like what’s happening, they can take their bat and ball and… move.

We just don’t seem to hear many people suffering from ‘affluenza’ anymore, after it was so rife during the last ten decade. But a GFC will have that effect.

So let’s have a look at some old habits that are slowly coming back into vogue: 

1. Debit cards – once they were the preferred way to pay for things, other than cash – now they’re enjoying renewed popularity for people who are credit averse.
2. Gifting – trimming down your Christmas list, doing a Kris Kringle and even making your gifts has replaced opulence and buying for the sake of buying. About time.
3. Lay-by – once the high priestess of retail, is becoming more used again and with interest free deals to pay off big ticket items such as furniture – which allows you better control over your cash-flow - there’s good reason why.
4. Recycling – your trash could be my treasure. Council throw outs have become the new shopping mecca for some bargain hunters, as well as used furniture shops and online classifieds. This means that bragging about a genuine low or no cost bargain has replaced keeping up with the Jones’ for some people.
5. Cooking at home – blame Masterchef and a plethora of other lifestyle programs for this one, but bringing out the ‘good china’ and sitting down to a delicious home cooked meal has replaced eating out more often at restaurants.
6. Cycling – perhaps it’s the ‘Cadel effect’ or the fact that with traffic and transport costs in major cities translating to an expensive and frustrating commute for many, more people are opting to cycle to work. Any why not, if they can get fit and save money in the process. We may not be seeing the old style Malvern Star on the road, but the trend is catching on nonetheless.
7. Family gatherings – getting back to our core values of what’s really important has meant choosing family gatherings over those with friends has gathered more momentum. The realists would say this has been perpetuated by children staying at home for longer out of necessity as they work towards buying a place of their own – while others will believe there is a real return to ‘the family’.

In all, this back to the future scenario is good news. Not for some sectors of the economy whose businesses are feeling the pinch as a result, but having a reality check about whether you are living beyond your means, for some, is a very good thing.

Grasping the opportunities of today with the prudence of yesterday, could be a winning combination.

 So if you’re a first home buyer and you feel like you’re ready, here is a suggested list you may want to check off before you decide to pounce:

1. SPEAK TO A RANGE OF LENDERS FIRST: You need to determine what you can afford by speaking to a range of lenders before you start your property search.
2. ENSURE YOUR CREDIT PROFILE IS IN THE BEST POSSIBLE SHAPE: This can be done lowering any existing credit card limits and paying off, or paying down, any outstanding debts.
3. LOOK AT THE LOAN FEATURES AND SERVICE AS WELL AS RATE: A loan’s features should be determined by what suits your personal circumstances for the medium to long term – and what lifestyle you can afford, even if rates rise. You should also get a feel for the level of customer service and ongoing support you can expect from each lender, as well as asking if they can give you a realistic indication of how long it will take to process the actual loan application.
4. OBTAIN PRE-APPROVAL ON THE MOST APPROPRIATE LOAN: When you’ve narrowed down your search for the most appropriate home loan, obtain pre-approval so when you do go to purchase, you can confidently make an offer on the property or bid at auction knowing you are pre-approved for finance, subject to a valuation.  
5. FACTOR IN EVERY POSSIBLE EXPENSE TO YOUR INITIAL BUDGET: Investigate and allow for every possible property related expense you may need to pay when you purchase a property. This can include costs such as Lenders’ Mortgage Insurance, pest and building inspections on any prospective purchases; loan fees including valuations etc; solicitors or conveyancing costs; stamp duty, transfer duty, mortgage duty and any relevant home or personal insurances.

Sure, there were acknowledgements that globally it has been a frustrating year for the world economy and things are still playing out, but Battelino believes the latest figures coming from the US are on the upside, and that economic news is now becoming more positive from Asia.

However he still concedes that it is possible that the global economic situation might take a sharp turn for the worse and says: “at this stage the Bank’s central scenario is that global GDP growth will be broadly in line with its long-run average over the period ahead. That would create a reasonably benign environment for the Australian economy.”

Indeed, borrowers are already exercising more cautious financial behaviour – a trend which was acknowledged by Battelino in the same speech when he noted the structural change in household spending and finance in recent years.

He explained that there has been a slow in credit growth and a noticeable shift away from spending on goods in stores, to spending on services.

And as a result he says: “This adjustment in consumer behaviour has created a difficult trading environment for some businesses, coming as it has after a prolonged boom. But the adjustment in Australia has been benign compared with the adjustments in household finances and housing markets elsewhere in the world, and it has put household spending and financing on a more sustainable path. This will ultimately benefit the health of the economy.”

So we now have more evidence suggesting there are certainly some uncharted waters ahead, but it does seem that many consumers are already making preparations to either de-leverage to protect their own position or just to further strengthen the position they already have.

And with the nation’s leading horse race being run on the same day that the Reserve Bank next meets and announces what will happen to official interest rates – much like the Melbourne Cup itself, any horse or borrower can win, as long as they’re prepared to put the hard work in.

But apart from the potential impact a jobs figure has on inflation figures and their subsequent interpretation by the Reserve Bank, what else does that figure actually tell us about what’s happening here in Australia?

What it does tell us is that if we look at what is actually trending in the job market, the situation is actually quite static.

And for those with mortgages, a static job market may also provide additional evidence that people are exercising more conservative financial behavior so they can knuckle down and try to better manage their situation with what they have.

After all – we’re no longer in the same job market that we were even five years ago before the GFC when many people felt comfortable changing jobs just to chase a bit more money.

Times have since changed – and it’s still very much a moving feast for committed consumers, most of who are keeping their cards very close to their chest indeed.

Gone are the conversations which centre around property prices and interest rates – only to be replaced by what good deal you can get on your internet, utilities, phone, groceries, petrol, car, insurances and basically anything that constitutes household spending.

In fact, it’s routine for someone to talk up which company or website they found their bargains through and how much they have saved in the process.

How times have changed.

Not so long ago you could all too often hear people talking about how much their house cost and what sort of play-things they were spending their money on – holiday homes, overseas holidays, expensive cars, boats and designer threads.

And now – that sort of talk is likely to make you stand out like a sore thumb. You’re much more likely to hear about how much someone is saving, rather than how much they’re spending.

A bit of frugality is certainly the new black.

With the current lull in interest rates and stability in mortgage repayment levels, there’s a clear reason that talk has now turned to other key influencers on our finances.

But there’s actually more to it than that.

For many people, there’s been a discernible shift back to how things used to be when you payed for items when you could afford them and you valued the things you paid for.

It’s fair to say that consumer behaviour in relation to spending has undergone its own makeover – and the results are rewarding.

But it’s preserving the effect of that makeover that will be the challenge for many from here on in – and that will take continued effort and discipline.

This was highlighted recently in the latest Genworth Homebuyer Confidence Index (HCI) which shed some light on how borrowers are managing their financial obligations – particularly in light of various media reports about mortgage stress.

Findings from the Genworth HCI released only this week found that despite higher rates of mortgage stress, the vast majority (85%) of borrowers who are experiencing mortgage stress say they are not actually behind on repayments.

Moreover, the Index found that borrowers are also becoming more conservative, with over 41% having overpaid their mortgage within the past 12 months.

The survey found that in relation to the reasons for mortgage stress, it showed the rising cost of living is the number one concern for an increasing proportion (72%) of home owners struggling with their mortgage.

To most, this would seem to indicate that although it is clear that mortgage stress is a real problem for some borrowers, it is other household costs that are actually creating the stress with their mortgage – rather than the mortgage itself creating the stress.

So with the current lull in interest rates set to continue and day-to-day speculation as to which way rates will go next, now is a good time to go through all of your costs, expenses, habits and lifestyle choices to determine how you can improve things on the financial front.

Gathering up all of your regular monthly, quarterly and annual bills is a good way to start.

That’s because if your mortgage repayments have largely been the same since last year – you need to have a close look at what direction all the other payments have been heading over the last twelve months and determine where you can reduce any of those bills.

Utilities, phone, internet, petrol, groceries and travel are seen by many these days as essential for modern living, so look at ways you can save money by either cutting down what you use or looking around at what various providers you can use.

Then there are all the insurances you may need – home and contents, mortgage, medical, car and life insurance. Prioritise what would be most important to you if you were not protected and make your decisions based on that.

You may well be surprised at what all of this can all do to improve your stress levels.