1 December 2014

‘Tis the season to spend money...

With the month of December now upon us, the focus for many has turned to Christmas shopping. Retailers around the country are rubbing their hands together in anticipation of a bumper season of festive sales. According to the Australian Retailers Association, Australian shoppers are expected to spend a whopping $45 billion between November 15 and December 24 this year - up from $43 billion during the same period last year.

What is a little concerning however is that according to finder.com.au’s Christmas Debt Survey conducted earlier this year, during the month of December alone, Australians are expected to spend almost $27 billion on credit cards; and the majority of people will take more than 30 days to pay off that debt. Worse still, 1 in 10 people will carry the Christmas debt (and incur interest on it) for three to six months; over five per cent will lug it around for 6 to 12 months; and four per cent (estimated at 100,000 Australians) will ring in 2016 with 2014’s expenses still hanging over their heads – that’s right you’ll still be paying for Frozen, Peppa Pig and The Transformers long after the batteries have run out, and the children have well and truly “Let It Go!”.

At an average interest rate of circa 18%, Christmas shopping on credit is a very expensive proposition for many in addition to average spends of over $1,000 per person.

On top of buying gifts, there is the Christmas lunch to pay for, and maybe even the Christmas holiday? And whilst it is easy to say “only spend what you have” people inherently get caught up in the festive spirit and overspend – close to 50% of people are estimated to exceed their Christmas budget (if they have one at all). The good news is there are options available to deal with excess generosity at Christmas.

Alternatives to the lingering credit card Christmas hangover

Utilise the redraw or offset facility attached to a mortgage loan

According to the Reserve Bank of Australia (RBA), the aggregate mortgage buffer – balances in mortgage offset and redraw facilities – has risen to around 15% of outstanding loan balances, meaning that on average Australians have the equivalent of two years scheduled repayments (at current interest rates) at their disposal. With the average home loan rate now less than six per cent this is a much better way to utilise credit at Christmas.

Switch credit cards – balance transfer

One of the most common deals you will see in the market during January is the offer of a credit card “balance transfer”, which allows consumers to transfer all of their credit card debt to a lower rate card for a limited period; a nice way for other institutions to get a share of consumers wallets under the guise of offering to help when they need it. Whilst this can be a good alternative, consumers won’t want to board the credit merry-go-round, changing providers every year, as it can adversely impact their credit file.

Consolidate personal debts with a mortgage

If consumers are unable to clear their Christmas credit card debt through savings or advance repayments held, they could consider consolidating their personal debts with their mortgage, meaning that rather paying 18% p.a. they will reduce the interest charge to around 6% p.a. potentially saving thousands in interest charges over time. The key with this option is to ensure the debt is not forgotten by simply succumbing to the repayments on the new loan. Borrowers should try to make additional repayments as if they were still paying off the debt to maximise the benefits.

Release equity from the mortgage

Some lenders offer “Cash out” loans, or equity release loans that allow applicants to borrow part of the equity held in their security property for personal purposes, which may include holidays, a new car or potentially Christmas presents.

Applicants could look to refinance to a “Cash out” loan product prior to Christmas to give them the money to spend, avoiding credit card debt; or they could refinance after the Christmas holidays to repay the outstanding credit card debt and maintain the facility. Similar to the point above, borrowers should look to make additional repayments as if the debt was still in place to maximise the benefits.

How La Trobe Financial can help

Our loan products cater for both the consolidation of debt and cash out, and most have a redraw facility; plus, we can cater for residential, commercial or rural securities on either a Full-Doc or Lite-Doc basis.

Here is a snapshot of some of loan products that can help with your clients Christmas spending needs:

Product Full-Doc Debt Consolidation Lite-Doc Debt Consolidation Full-Doc
Cash Out
Cash Out
Cash Out
Interest rate From
5.60% p.a.
6.50% p.a.
5.60% p.a.
6.50% p.a.
7.69% p.a.
Maximum loan amount $1.5m $2.5m $1.5m $2.5m $2m
Maximum LVR 80% 80% 80% 80% 70%
LMI required No No No No No
Term 30 years 30 years 30 years 30 years 25 years
Credit impairment permitted Yes Yes Yes Yes Yes
Redraw permitted Yes Yes Yes Yes Yes

Settle before Christmas

We are still taking applications for borrowers looking to settle prior to Christmas, so there is still time for your clients to get an application in and have cash for Christmas.

Please call your Senior Manager Client Partnerships or our credit team direct on 13 80 10 to discuss your scenario.

... That's Lending

Best regards,
Cory Bannister, Vice President, Head of Distribution
La Trobe Financial Asset Management Limited

La Trobe Financial is one of Australia's leading independent credit specialist Fund Managers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 123 staff and has managed over AUD$10Billion covering over 100,000 investment grade assets since inception in 1952.

Copyright 2014 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer

The following awards and ratings were given to the Pooled Mortgage Option within the La Trobe Financial Mortgage Fund and may be viewed on our website

Ratings And Awards

Click to share   


Newsletter Footer

Please Note: This publication is for accredited broker use only and is not for distribution to consumers.

^ Depends on risk grade of Borrower

All loan applications are fully assessed to ensure the loan is not unsuitable and that we meet our responsible lending obligations in accordance with our usual underwriting requirements. All features and interest rates are current as at the date of publication. Conditions, fees and charges apply. This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website. La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you. The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may be lower than expected. Investors risk losing some or all of their principal investment. The investment is not a bank deposit.

La Trobe Financial Services Pty Limited - Australian Credit Licence Number: 392385
La Trobe Financial Asset Management Limited - Australian Credit Licence Number: 222213

Terms, conditions, fees, charges and La Trobe Financial lending criteria apply.

1. Zenith's "recommended" rating indicates that it has high confidence in the manager meeting its objectives. The Zenith Investment Partners ("Zenith") ABN 60 332 047 314 rating referred to in this document is limited to "General Advice" (as defined by section 766B of Corporations Act 2001) and based solely on the assessment of the investment merits of the financial product on this basis. It is not a specific recommendation to purchase, sell or hold the relevant product(s), and Zenith advises that individual investors should seek their own independent financial advice before investing in this product. To view the relevant research information, please visit www.latrobefinancial.com The rating is subject to change without notice and Zenith has no obligation to update this document following publication. Zenith usually receives a fee for rating the fund manager and product against accepted criteria considered comprehensive and objective.
2. SQM Research - 4 stars to 4.25 stars - superior, suitable for inclusion on most Approved Product Lists. To view the relevant research information, please visit www.latrobefinancial.com This rating will not take into account your, or your clients' objectives, financial situation or needs. It is up to investors to consider whether specific financial products are suitable for your objectives, financial situation or needs. Research houses receive a fee from La Trobe Financial for rating the product.
3. Lipper Leaders Rating Total Return (Score – 5) Lipper Ratings for Total Return reflect funds’ historical return performance relative to peers. The ratings are subject to change every month. The highest 20% of funds in each peer group are named Lipper Leader or a score of 5 for Total Return. Lipper Leader ratings are not intended to predict future results and does not guarantee the accuracy of this information. More information is available at www.lipperweb.com. Thomson Reuters Copyright, All Rights Reserved.
4. Australia Ratings (AFSL 346138) makes every effort to ensure the reliability of the views and rankings expressed in its reports and those published on its websites. Australia Ratings research is based upon information known to it or which was obtained from sources it believed to be reliable and accurate at time of publication. However, like the markets, it is not perfect. This report is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore discuss, with their financial planner or advisor, the merits of each rating for their own specific circumstances and realise that not all investments will be appropriate for all subscribers. To the extent permitted by law, Australia Ratings and its employees, agents and authorised representatives exclude all liability for any loss or damage (including indirect, special or consequential loss or damage) arising from the use of, or reliance on, any information within the report whether or not caused by any negligent act or omission. If the law prohibits the exclusion of such liability, Australia Ratings hereby limits its liability, to the extent permitted by law, to the resupply of the said information or the cost of the said resupply.