September 28, 2022

Soaring Used Car Prices Could Leave You Underinsured

The refi rush is breaking records, soaring used car prices are a cue to revise hedging, and one in two investors fail to plan. Here are five things you may have missed this week.

Homeowners rush to refinance

Home loan borrowers are not taking interest rate hikes lying down.

Mortgage refinancing is booming, with refinancing for homeowners rising nearly 10% in June to a new record high of $12.7 billion for the month. This is 24.6% more than in June 2021.

As lenders compete for business, offers for refinancers are heating up.

AMP Bank is offering up to $5,000 cash back on refinances, though you need a million dollar mortgage to qualify.

One Two Home Loans offers $5,000 cash back and will match any additional loan payments you make in the first six months, up to $2,500 in total.

Bank of Melbourne and BankSA both offer cash back rewards of $4,000.

While conditions apply to all of these offers, they might be worth looking into to see if you’ll save.

seasonally adjusted value of external financing
Value of external financing (seasonally adjusted). Source: ABS Lending Indicators June 2022, published in August 2022.

Used cars up 15.7% – time to rethink insured values

Used car values ​​have skyrocketed during the pandemic, and although the rate of appreciation is slowing, used car prices are still 15.7% higher than a year ago according to the Datium Insights-Moody’s Analytics Used Vehicle Price Index.

Compare The Market warns that this could see car insurance values ​​not keeping pace with market values ​​- especially if your car is insured for an agreed value instead of market value.

Agreed value policies traditionally come with slightly higher premiums because cars normally depreciate, sometimes quickly.

In these not-so-normal times, it’s worth checking what your car is insured for – market value or agreed value, then hop on sites like Redbook to see what the vehicle is worth.

It can pay off to have a party drink on hand. A five-year-old Toyota Hilux that sold for $56,440 new in 2017 may be worth $51,600 today according to Redbook.

What the Average Real Estate Investor Really Looks Like – and Who Doesn’t Plan

Despite our national obsession with real estate, most Australians do not own investment property.

The latest PropTrack Insights report from the REA Group shows that only about one in five households own a rental property, and most do not fall into the ultra-rich camp.

The majority of owners also reimburse their own accommodation.

Surprisingly, households that fully own their homes are much less likely to own rental property.

While the majority of owners are between the ages of 36 and 65, more than one in 10 individuals between the ages of 25 and 34 own an investment property.

Of all property investors, the overwhelming majority (70%) own only one rental unit.

Although income can determine the number of properties an investor owns, another factor may also come into play.

A nationwide survey by Perth-based property group Momentum Wealth found that 52% of investors who own a property have no formal investment plan in place, while up to 89% of those who own multiple properties follow a personalized investment roadmap.

Damian Collins, managing director of Momentum Wealth, said the planning “ensures an informed purchase decision early in the real estate journey and provides a solid launch pad for further investments in the future.”

Were the good old days really that good?

After years of miniscule interest rates and barely perceptible inflation, many Australians are having to tighten their belts.

He can see us dreaming of the good old days.

However, a new report from the Productivity Commission shows that, overall, we are much better off today than in the past.

A century ago, buying a bed required 185 hours of work. In the 1990s, we had to work an average of 41 hours to buy a bed. These days, that figure has dropped to 6 p.m.

What is particularly interesting is that the Productivity Commission asserts that the dramatic increase in living standards over the past 200 years is not the historical norm. For most of human history, the average person has experienced virtually no growth in material prosperity.

Maybe 2022, despite all its challenges, isn’t so bad after all.

From billionaire to millionaire in a flash

For the lucky few who win a lottery in Australia, the winnings are not taxable.

That’s not the case anywhere else in the world, as one lucky bettor in the United States is about to find out.

An Illinois resident is coming off a very solid win, taking home a $1.28 billion (A$1.84 billion) lottery prize.

But there is a twist.

Winners in the United States can choose to take their prize as a 30-year annuity or opt for a much smaller lump sum.

Most people opt for the lump sum, but whichever choice you make, the winnings are taxable.

The result according to Forbes magazine is that if the lucky winner takes the money now, the prize drops to $747 million (A$1.07 billion).

Once the tax is diverted, the payment will be reduced to around $433 million (A$622 million).

It’s still a solid win, but it sees the bettor go from billionaire to millionaire in the stroke of a pen.

Meanwhile, the US Internal Revenue Service (the US equivalent of the Australian Tax Office) also bagged a nice win.

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