Next Tuesday’s RBA decision on official rates will attract its usual round of speculation, with most commentators now predicting a rate cut.

However, for borrowers it’s no longer a matter of your usual game of wait-and-see in relation to how your finances may be impacted by events of the first Tuesday of each month.

That’s because it’s now very difficult to forecast what might happen to your loan if you’re currently enjoying a standard variable rate, as there are no longer hard and fast rules centred on how lenders are responding to what official rates are doing. 

Since the banking majors have started moving their rates independently of the Reserve Bank, rate changes across the industry have now become a moveable feast and it’s anyone’s guess as to when and where they may head at any one time.

So borrowers can only sit and keep an eye on their own circumstances to see how they are impacted over time – and be open to change if necessary.

And then on May 8, attention will turn to all things Federal Budget to see if there are any measures announced which could stimulate more confidence in the economy, address the issue of housing affordability once and for all, or at least give borrowers some general reassurance around their income, spending and finances.

Clearly, there is a need to reduce pressure on rising household expenses for the many Australians still struggling with trying to balance their budget, but with a dogged determination by the Government to bring the budget back into surplus in 2012/2013, I wouldn’t be holding my breath.

We will wait and see what can be taken from it, but would expect to see spending cuts in many areas, which will do little for a consumer’s bottom line.

Two Tuesdays = Two Opportunities…..but still no guarantees.

Who would have thought it was possible even ten years ago?

However, as convenient as it may seem to be able to pay for goods or services in the middle of virtually anywhere by using your credit card, does this mean that the overriding need for convenience has now replaced consumerism as our next potential financial problem?

Think about it – another on-the-spot transaction that doesn’t require cash. 

Then add that to the myriad of other cashless transactions we already make and it makes it even more challenging to try and keep track of where our money is being spent – until you get that credit card statement at the end on the month.

Convenience is great – don’t get me wrong, as it’s an obvious bi-product of us all being more accessible and working more hours around the clock, resulting in our personal time being even more precious.

However, in our quest to try and fit as much as we can into our busy lives, we can now so easily spend our hard earned dollars with the swipe of a card – anywhere and anytime. And that takes discipline to have some idea of whether or not you can afford to swipe that card.

There is much less emotion attached to a swipe, than handing over cold, hard cash.

So, while convenience is great – is can come at a great price.  Just be aware.

The awards are the only research-based industry awards in the country and are described as providing the most rigorous guide as to which lenders are at the top of their game.

Results are based on the opinions of 5,000 borrowers and close to 500 mortgage brokers and take into account the actual experiences that consumers and brokers have had.

And with this criteria in mind, Resi was named Australia’s Best Non-Bank Lender for 2012.

So as talk continues about the virtues of competition in the mortgage industry, particularly in the wake of the latest interest rate announcements, great Australian businesses like Resi continue to go about doing what they do best….supporting borrowers by providing a better deal on their mortgage.

And while we are incredibly proud of this latest achievement, we won’t rest on our laurels but will continue to offer the borrowers of Australia a quality alternative to the big four banks – with a clear focus on a solutions driven service proposition, competitive rates and continuing borrower education.

And yet – after all has been said and done, has anything really changed? 

• Are borrowers are still able to get a better deal elsewhere?  Tick.
• Are there other options for borrowers outside the big banks?  Tick

So – without trying to say I told you so…..I told you so….here in this blog… only one week ago.

And now it’s time that disenchanted borrowers looked at the significant service and price differential between the major banks and other competitive lenders if they are really serious about switching.

Because here‘s no point switching between the big four banks when they’re all sitting around a similar rate band and are still priced more expensively than the competition.

However, the real deal clincher now is the difference that those lower ongoing rates, coupled with a more competitive service proposition will make to the borrower’s situation. 

And this is the BIG difference outside the BIG four.

Consumers can either continue to be dictated to by the big banks – or choose to take back some control by joining the growing community of self-organized borrowers on social networks who are opting out of the big bank merry-go-round.

It’s clear that social networks are becoming a powerful catalyst for borrowers to switch lenders as they offer access to a public forum where borrowers are able to freely offer tips and swap experiences and opinions on service and products.

And that’s a very good thing as this will open up the competitive landscape further by providing the next generation of borrowers with a very powerful hub to build online communities.

It should also be said that competitive lenders with superior service delivery are not threatened by this at all, but moreover are embracing this for what it provides – an instant forum for customer advocacy.

We might not be as big and bold, but we’re a tenacious lot…and we’re not going anywhere.

Because even if we’re only competing against ourselves – competition is what makes us strive to do better the next time and keep improving ourselves.

We start off learning about the value of competition even before we go to school –  whoever gets to the party table first gets the best food, whoever correctly answers the question first gets a gold star….you get the picture.

And then we see it really run rife at school, sport, University and into the big wide world of job seeking – not to mention when you go to buy a property.

It’s unavoidable and everywhere. And yet without it in the business world, consumers would have no choice and would be somewhat like living in a dictatorship – which is why it’s so relevant to what’s happening now in the mortgage marketplace.

With so much conjecture about what the major banks are going to do with their interest rates after the Reserve Bank’s latest decision, the benefit of still having a healthy and competitive market is thankfully what consumers can still hang onto.

Because if you don’t like something – you look around and see what else is on offer.

And like any competition – you just need to ensure you don’t get left on the starting line wondering why everyone else is already ahead of you.

The gun is firing.

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.