The much anticipated rise in mortgage lending rates has not happened as predicted and the Overnight Policy Rate remains at 3.5%, and Base Lending Rate for the time being, stays at 6.75%. However pundits maintain that an interest rates increase in the third quarter of 2008 is likely.
Regardless of the eventual movement in OPR, Malaysian lenders continue to compete, and September saw the launching new “discounted” home loan packages and some with innovative features.
For quite a long time, HSBC watched as Malaysian Banks slashed rates. Now the “world’s local bank” with a long history and reputation of service excellence, finally introduces a number of “winning” home loans. If you are not fussy about its 7-year lock-in, then check out HSBC’s Home Smart value Plan (Non Free Moving Cost, No MRTA) which starts with a first year rate of BLR-2.25%, followed by BLR-1.75% (years 2-5) and then BLR-1.95% from the sixth year onwards.
The bonus is that the said package comes with “flexi” features, allowing prepayments and withdrawals.
However, the attractive rates apply provided the Letter of Offer is accepted within 3 days of issuance, which is fair enough.
As far as Refinancing is concerned, smart money is with HSBC’s Home Smart Refinancing (min RM RM250,000) that starts with BLR-2.35% and ends with BLR-2% (years 2-5 interest rates vary depending on the loan amount). This is without a doubt the star amongst all refinancing packages out there…and as said earlier…delivered with a healthy dose of top-notch service.
Unconfirmed reports from borrowers seem to indicate that for existing HSBC clients and for those with good credit credentials, HSBC may even do better than the published rates! See the rest of HSBC’s new loans.
ING went off the lending activity radar for a while but is now back with a vengeance, determined to reclaim the mantle of the “lowest fixed rates”. ING is now offering Non-Free Moving Cost loans with rates fixed at 5.85% (margin of below 80%) and 5.95% (80%-90% margin).
Regardless of whether interest rates are likely to increase in the short or long term, a fixed rate of 5.85% is always a good bet as it provides certainty for borrowers and a peace of mind. (click here to see how much more interests is charged as rates go up)
For its FREE MOVING COST package, ING is offering 6.25% (below 80% margin) and 6.35% (80%-90% margin).
The rates apply for properties that are completed as well as those under-construction. Insurance/MRTA is compulsory **
A point to note: ING will not consider applicants with more than 4 credit cards.
For certain ING will not be offering this special low fixed rate for much longer and the loan package offer closes end September 2008. So hurry!
** Note: What if you like the low fixed rate BUT do not like to the compulsory Insurance/MRTA? Although it is not official news, AIA Mortgage with fixed rates of 5.99% (0.05% higher than ING’s…plus change) has on a number of occasions waived its requirement for insurance.
Bank Simpanan Nasional enters the fray packing a mighty punch with its 5.99% Islamic Fixed Rate (BSN Mortgage Bonanza). Although fixed rates have previously been offered by insurance lenders such as AIA and ING and Islamic Banks, BSN is the first Bank to offer an Islamic financing with such a low fixed rate.
The financing offer is only applicable to completed properties, up to 90% margin of financing. Minimum loan is set at RM200,000
As with any Islamic financing , enjoy a 20% discount off the stamp duty for new purchases, and also a Takaful policy that covers even ‘Acts of God’.
The challenge is to locate one of only 13 branches that do housing loans. For further information, click here and your enquiries will be directed to the relevant BSN branch.
Whilst “deposit-linked” loans are quite common these days, Alliance Islamic has on offer an Islamic Deposit-Linked Financing…with a good twist!
While a normal Savelink (deposit-linked) loan allows you to offset the amount you keep in deposit against the loan principal, the deposit-linked- account DOES NOT pay you any interest per se.
Alliance Islamic Flexi is a deposit-linked account that NOT ONLY saves you interest by offsetting the deposit sum against the financing sum…IT ALSO PAYS YOU A “PROFIT RATE”. After all, why have your cake if you can’t eat it.
In addition, the one-time set up fee of RM200 applicable on normal Savelink is also not applicable with the Islamic Flexi.
Other goodies include:
-Financing tenure of 35 years or up to age 65, whichever is earlier
-Maximum financing of 90% of purchase price
-Option to include MRTA and stamp duty into financing (+ additional 5%)
-Option to choose Zero Entry Cost (ZEC)/ Financed Entry Cost (FEC) Package) on daily rest calculation
-Rate protection with capped ceiling rate at 9.9%
-No stamp duty for refinancing from conventional loan
-20% discount on stamp duty for new purchase
-For completed and Under Construction properties and for landed & Non-landed
See Alliance Islamic Financing Rates here…
Bank Islam continues to impress with its Baiti Cakna, offering 100% financing for both completed and under-construction properties. The margin of 100% is only for properties on Bank Islam’s panel of developers . Interest rate for properties under construction is 2% in year 1; 4% in year 2 and BFR-1.3% to BFR-1.8% thereafter (non Zero Entry). For completed properties, year 1 interest rate is 3% and 5% for year 2. See Bank Islam Loans
More good news follow. OCBC has reintroduced their “Hybrid Loans” ie fixed for a few years and then float, and it is a very good one! At the time of this writing OCBC has not made public the rates but we understand it is ridiculously low fixed rate in the first 3 years, and then followed by up to BLR-2% from year 6 onwards. How low is the rate? Ask OCBC here.
While it is a normal term loan, loan prepayment and over the counter withdrawals are allowed.
Another bonus from OCBC is that while a lot of lenders look at total commitment (including other debts, credit cards, hire purchase etc) OCBC’s credit assessment focuses on the repayment amount of the OCBC loan you are applying to as a ratio of your declared income. Translated, it means that technically it is “easier” to qualify for approval, although by no means does that imply that the Bank compromises on quality.
Finally, MAA Mortgage with its unique 100-year revolving loans (Long Life Loan) has revised its rates to KLIBOR[3.69%] + 3.15% = 6.84%. With a minimum loan of RM222,000 for landed properties and RM300,000 for non-landed properties, MCL remains the only loan that caters for borrowers over 65 years of age.
MAA’s financial planners also feel that with 100 year loan, borrowers can manage their retirement years cash flow better and have cash-at-call (withdrawal facilities are available) without having to sell their homes to fund retirement expenses.
In addition, MAA recently launched 2 new packages (MHF) with KLIBOR + 1.89% for completed and under-construction properties above RM225,000 and KLIBOR + 2.39% for properties under RM225,000. Unlike “Long-Life” MHF does not come with a revolving credit component and it’s a straight out term loan albeit with a maximum term of 45 years or until 80 years of age.
Special promotion: Zero Entry Cost loans are available at MAA at same rates provided applications are received before 31st March 2009. To apply/enquire, click here
Tuesday, September 16, 2008
Malaysia Home Loans - What's New (September, 2008)
Monday, September 15, 2008
How to get top dollars for your house
SPRING is selling season for real estate and, despite warnings that this year will be worse than last year, there are still things people can do to get the best price.
Brock Harcourts Henley Beach director Sam Hosking says people could lose tens of thousands of dollars if they fail to make their home stand out from the crowd.
"There are many reality-TV shows about the property market that demonstrate the benefits of time and effort spent on presentation prior to sale,'' he said. "A poorly presented home is unlikely to generate emotional appeal and attract buyers.''
Mr Hosking said it was important to discuss presentation with your real estate agent, who might call in a specialist to help.
"Take the time to tidy up the garden and consider cosmetic improvements such as a fresh coat of paint, because it is not just a case of a quick tidy-up the night before the inspection,'' he said.
Timing is also important.
"The process of selling a home can take three to four months from start to finish, so make sure you allow enough time,'' he said.
"This includes appointing an agent, preparing the property for inspection and finalising marketing and advertising material. Once on the market, the time it takes to sell a property that has been accurately priced is generally between four and six weeks. If you're selling your home by public auction, the marketing schedule will run for about four weeks.''
The method of selling a property is usually either by private treaty or public auction, although some prestige homes may sell by registration of interest or tender.
Mr Hosking said it was important to discuss this with your agent.
"If a property is likely to attract more than one potential buyer, auction allows competitive bidding to increase the final sale price,'' he said.
"However, deciding the method of sale should be an objective decision based on market conditions, the location of the home, the type or style of home and whether it has a multitude of uses.''
Mr Hosking said in some states new laws had been introduced to combat under-quoting.
"Both agent and vendor are required to record their expected price. Advertisements must use the higher amount, known as the prescribed minimum marketing price, and can range 10 per cent above if desired,'' he said.
"Auction practices have also changed, with people not allowed to bid unless they have registered with the agent.''
Checklist
* Start early - the process of selling a home can take three or four months.
* Appoint an agent you trust.
* Confirm selling costs with your agent.
* Present your home in the best shape possible.
Source: news.com.au
Date: 15/09/2008
Brock Harcourts Henley Beach director Sam Hosking says people could lose tens of thousands of dollars if they fail to make their home stand out from the crowd.
"There are many reality-TV shows about the property market that demonstrate the benefits of time and effort spent on presentation prior to sale,'' he said. "A poorly presented home is unlikely to generate emotional appeal and attract buyers.''
Mr Hosking said it was important to discuss presentation with your real estate agent, who might call in a specialist to help.
"Take the time to tidy up the garden and consider cosmetic improvements such as a fresh coat of paint, because it is not just a case of a quick tidy-up the night before the inspection,'' he said.
Timing is also important.
"The process of selling a home can take three to four months from start to finish, so make sure you allow enough time,'' he said.
"This includes appointing an agent, preparing the property for inspection and finalising marketing and advertising material. Once on the market, the time it takes to sell a property that has been accurately priced is generally between four and six weeks. If you're selling your home by public auction, the marketing schedule will run for about four weeks.''
The method of selling a property is usually either by private treaty or public auction, although some prestige homes may sell by registration of interest or tender.
Mr Hosking said it was important to discuss this with your agent.
"If a property is likely to attract more than one potential buyer, auction allows competitive bidding to increase the final sale price,'' he said.
"However, deciding the method of sale should be an objective decision based on market conditions, the location of the home, the type or style of home and whether it has a multitude of uses.''
Mr Hosking said in some states new laws had been introduced to combat under-quoting.
"Both agent and vendor are required to record their expected price. Advertisements must use the higher amount, known as the prescribed minimum marketing price, and can range 10 per cent above if desired,'' he said.
"Auction practices have also changed, with people not allowed to bid unless they have registered with the agent.''
Checklist
* Start early - the process of selling a home can take three or four months.
* Appoint an agent you trust.
* Confirm selling costs with your agent.
* Present your home in the best shape possible.
Source: news.com.au
Date: 15/09/2008
Thursday, September 11, 2008
Australia: New way to buy property
BUYING into Australia's $3.2 trillion housing market -- without owning a single property -- will soon be a mouse click away.
An agreement between the Australian Securities Exchange and property research groups PR Data and Rismark has paved the way for the introduction next year of residential property derivatives, which will be traded on the ASX like shares, The Australian reports.
Modelled on a successful US scheme that had $US2 billion ($2.5 billion) worth of trades in its first year, Australian investors will be able to both buy and sell derivative or futures contracts in our major housing markets without owning property.
"It's a synthetic way of gaining exposure to Australian housing markets,'' said Paul Williams, the head of property derivatives for GFI Australia.
"This is exciting for our developing property derivatives market.''
The scheme is mostly pitched at investors seeking exposure to property without the hassles of owning real estate and the typical $20,000-$50,000 transaction costs involved in buying and selling residential property. It could also be a godsend for renters priced out of the market by escalating prices.
Rismark International executive director Ben Skilbeck said first-time buyers required to save a $100,000 deposit for a $500,0000 home were commonly locked out because by the time they had saved their deposit, the cost of the house had risen another $200,000.
Mr Skilbeck said owing derivatives meant savings would effectively increase in line with house prices, providing a hedge against a future housing boom.
While the ASX declined to reveal details of the scheme -- including the cost to investors -- market players will be able to punt on falling house prices.
"If prices are going down in Perth, I will be able to sell my derivatives contract at a profit,'' said one analyst.
The scheme, which involves the purchase of derivative contracts from the ASX, is likely to be popular with apartment builders and developers looking to set benchmarks for both pricing and returns.
Source: news.com.au
Date: 11/09/2008
An agreement between the Australian Securities Exchange and property research groups PR Data and Rismark has paved the way for the introduction next year of residential property derivatives, which will be traded on the ASX like shares, The Australian reports.
Modelled on a successful US scheme that had $US2 billion ($2.5 billion) worth of trades in its first year, Australian investors will be able to both buy and sell derivative or futures contracts in our major housing markets without owning property.
"It's a synthetic way of gaining exposure to Australian housing markets,'' said Paul Williams, the head of property derivatives for GFI Australia.
"This is exciting for our developing property derivatives market.''
The scheme is mostly pitched at investors seeking exposure to property without the hassles of owning real estate and the typical $20,000-$50,000 transaction costs involved in buying and selling residential property. It could also be a godsend for renters priced out of the market by escalating prices.
Rismark International executive director Ben Skilbeck said first-time buyers required to save a $100,000 deposit for a $500,0000 home were commonly locked out because by the time they had saved their deposit, the cost of the house had risen another $200,000.
Mr Skilbeck said owing derivatives meant savings would effectively increase in line with house prices, providing a hedge against a future housing boom.
While the ASX declined to reveal details of the scheme -- including the cost to investors -- market players will be able to punt on falling house prices.
"If prices are going down in Perth, I will be able to sell my derivatives contract at a profit,'' said one analyst.
The scheme, which involves the purchase of derivative contracts from the ASX, is likely to be popular with apartment builders and developers looking to set benchmarks for both pricing and returns.
Source: news.com.au
Date: 11/09/2008
Wednesday, September 10, 2008
Demand for home loans remains weak
JUST 50,279 people took out a new home loan in July and retail spending remained slim, despite households benefiting from a round of tax cuts.
Demand for owner-occupied home loans fell for a sixth straight month in July, declining by a seasonally-adjusted 0.2 per cent to a four-year low, the Australian Bureau of Statistics says.
Economists had forecast flat growth in July.
At the same time, the bureau's new retail trade trends report shows consumer spending rose 0.1 per cent in trend terms to $18.2 billion.
The data - released today - back the Reserve Bank of Australia's decision to cut its official cash rate earlier this month, the first reduction in nearly seven years.
The $7 billion in tax cuts introduced in July - worth around $20 per week for the average wage earner - was partly offset by another round of independent loan rate increases by the retail banks.
The format for the bureau's new retail report, which now just gives trend estimate figures rather than seasonally-adjusted and original measures as well, was the result of the Rudd Government's Budget cuts.
The sample size for the retail report has also been been cut by two thirds, which the bureau says will increase month-to-month volatility in the numbers.
However, the seasonally-adjusted numbers - preferred by economists and financial market traders - are available on the bureau's website.
It showed retail trade rose by a seasonally-adjusted 1.4 per cent in July.
Economists had forecast a seasonally-adjusted increase of 0.5 per cent.
Source: news.com.au
Date: 09/09/2008
Demand for owner-occupied home loans fell for a sixth straight month in July, declining by a seasonally-adjusted 0.2 per cent to a four-year low, the Australian Bureau of Statistics says.
Economists had forecast flat growth in July.
At the same time, the bureau's new retail trade trends report shows consumer spending rose 0.1 per cent in trend terms to $18.2 billion.
The data - released today - back the Reserve Bank of Australia's decision to cut its official cash rate earlier this month, the first reduction in nearly seven years.
The $7 billion in tax cuts introduced in July - worth around $20 per week for the average wage earner - was partly offset by another round of independent loan rate increases by the retail banks.
The format for the bureau's new retail report, which now just gives trend estimate figures rather than seasonally-adjusted and original measures as well, was the result of the Rudd Government's Budget cuts.
The sample size for the retail report has also been been cut by two thirds, which the bureau says will increase month-to-month volatility in the numbers.
However, the seasonally-adjusted numbers - preferred by economists and financial market traders - are available on the bureau's website.
It showed retail trade rose by a seasonally-adjusted 1.4 per cent in July.
Economists had forecast a seasonally-adjusted increase of 0.5 per cent.
Source: news.com.au
Date: 09/09/2008
Save money by swapping, not shopping
AUSTRALIAN mothers are swapping rather than shopping to try to save money.
New websites set up by enterprising mums allow parents to swap services such as babysitting, odd jobs, holidays, and clothes.
One woman has signed up to new site mumswap.com.au to swap her husband's lawnmowing for clothes for her daughter.
Another new site, matchandmind.com.au, has been set up to help parents wanting to look after each others' children for free.
As grocery and petrol prices soar, and families battle crippling interest rates, these savvy mums are keen to give families a break -- often for no personal profit.
Melbourne mum Christie is the brain behind mumswap.com.au which is a free bartering hub.
It has been going only since the beginning of August, but is on track to get 2000 visitors a month.
Christie, 29, a mother of one from the southeastern suburbs, said the idea was born when she "realised everything mums were saying they wanted could be provided by another mum''.
"Mums offer to do someone's chores and borrow their boat for the weekend or do some babysitting and get some cooking lessons,'' she said.
Babysitting swap site, matchandmind.com.au, was set up by Carol Stephenson, a Malvern mother of five.
"Not having family in Melbourne, we would swap babysitting as we needed to with friends, and I thought there must be some way we could help others do the same. And so the website was born,'' she said.
"If you want a morning off once a week, it's like a play date -- it gives you a break. And then you might return the favour another day.''
Mums pay $39.95 a year to contact others, but no money changes hands for babysitting.
Another website, runrabbitrun.com.au, begun by Eltham mum Michelle Caird two weeks ago, offers designer kids' clothes at cost prices.
One keen money-saver is Jodie Daniel, 40, a Keysborough mother of two.
She's signed up to mumswap.com.au to help promote her home-based business deadsea.com.au, selling beauty products, and to swap some of her kids' clothes and toys.
Source: news.com.au
Date: 10/09/2008
New websites set up by enterprising mums allow parents to swap services such as babysitting, odd jobs, holidays, and clothes.
One woman has signed up to new site mumswap.com.au to swap her husband's lawnmowing for clothes for her daughter.
Another new site, matchandmind.com.au, has been set up to help parents wanting to look after each others' children for free.
As grocery and petrol prices soar, and families battle crippling interest rates, these savvy mums are keen to give families a break -- often for no personal profit.
Melbourne mum Christie is the brain behind mumswap.com.au which is a free bartering hub.
It has been going only since the beginning of August, but is on track to get 2000 visitors a month.
Christie, 29, a mother of one from the southeastern suburbs, said the idea was born when she "realised everything mums were saying they wanted could be provided by another mum''.
"Mums offer to do someone's chores and borrow their boat for the weekend or do some babysitting and get some cooking lessons,'' she said.
Babysitting swap site, matchandmind.com.au, was set up by Carol Stephenson, a Malvern mother of five.
"Not having family in Melbourne, we would swap babysitting as we needed to with friends, and I thought there must be some way we could help others do the same. And so the website was born,'' she said.
"If you want a morning off once a week, it's like a play date -- it gives you a break. And then you might return the favour another day.''
Mums pay $39.95 a year to contact others, but no money changes hands for babysitting.
Another website, runrabbitrun.com.au, begun by Eltham mum Michelle Caird two weeks ago, offers designer kids' clothes at cost prices.
One keen money-saver is Jodie Daniel, 40, a Keysborough mother of two.
She's signed up to mumswap.com.au to help promote her home-based business deadsea.com.au, selling beauty products, and to swap some of her kids' clothes and toys.
Source: news.com.au
Date: 10/09/2008
iPod invented by furniture salesman
Apple has admitted it did not invent the iPod, which was in fact the brainchild of a British man who patented his prototype 30 years ago.
Kane Kramer, now 52, took out a worldwide patent in 1979 for a media player that looked similar to the iPod but could store only 3.5 minutes of music. He dubbed it the IXI and planned to expand its capacity as technology advanced.
However, after running out of funds in 1988 Kramer was unable to put forward the £60,000 needed to renew the patent so his idea fell into the public domain.
Kramer, now a struggling furniture salesman, was therefore not entitled to receive any money or recognition from those who used his design.
The revelations came to light after patent holding company Burst sued Apple, claiming the iPod infringed on its patents.
Apple flew Kramer to the US to give evidence in its defence and used his original 1979 drawings of the IXI as evidence that Kramer, in fact, was the iPod's inventor.
The original iPod was unveiled in October 2001 and, since then, 163 million have been sold, filling Apple's coffers with billions of dollars in revenue.
"I was up a ladder painting when I got the call from a lady with an American accent from Apple saying she was the head of legal affairs and that they wanted to acknowledge the work that I had done," Kramer told the Daily Mail.
"I must admit that at first I thought it was a wind-up by friends. But we spoke for some time, with me still up this ladder slightly bewildered by it all, and she said Apple would like me to come to California to talk to them."
Kramer was questioned by Burst's lawyers for 10 hours. The dispute was eventually settled out of court.
Kramer, who recently closed down his struggling furniture design business, is now negotiating with Apple to receive compensation for the company's use of his drawings.
So far he has only been paid a fee by Apple for consultancy work related to the legal case.
"I can't even bring myself to buy an iPod for myself," he told the newspaper.
"Apple did give me one but it broke down after eight months."
Source: smh.com.au
Date: 10/09/2008
Kane Kramer, now 52, took out a worldwide patent in 1979 for a media player that looked similar to the iPod but could store only 3.5 minutes of music. He dubbed it the IXI and planned to expand its capacity as technology advanced.
However, after running out of funds in 1988 Kramer was unable to put forward the £60,000 needed to renew the patent so his idea fell into the public domain.
Kramer, now a struggling furniture salesman, was therefore not entitled to receive any money or recognition from those who used his design.
The revelations came to light after patent holding company Burst sued Apple, claiming the iPod infringed on its patents.
Apple flew Kramer to the US to give evidence in its defence and used his original 1979 drawings of the IXI as evidence that Kramer, in fact, was the iPod's inventor.
The original iPod was unveiled in October 2001 and, since then, 163 million have been sold, filling Apple's coffers with billions of dollars in revenue.
"I was up a ladder painting when I got the call from a lady with an American accent from Apple saying she was the head of legal affairs and that they wanted to acknowledge the work that I had done," Kramer told the Daily Mail.
"I must admit that at first I thought it was a wind-up by friends. But we spoke for some time, with me still up this ladder slightly bewildered by it all, and she said Apple would like me to come to California to talk to them."
Kramer was questioned by Burst's lawyers for 10 hours. The dispute was eventually settled out of court.
Kramer, who recently closed down his struggling furniture design business, is now negotiating with Apple to receive compensation for the company's use of his drawings.
So far he has only been paid a fee by Apple for consultancy work related to the legal case.
"I can't even bring myself to buy an iPod for myself," he told the newspaper.
"Apple did give me one but it broke down after eight months."
Source: smh.com.au
Date: 10/09/2008
Monday, September 8, 2008
Is the world facing another stagflation?
THE 1970s were known for stagflation due to the 1973 oil shock following a war in the Middle East that saw the Arab members of the Organisation of Petroleum Exporting Countries lowering oil production.
Today, the world might be entering another period of stagflation despite lower energy and food prices as a number of countries, especially in the euro area and Japan, have reported slower growth and stock markets continue to weaken.
This time around, the world is again facing heighten geopolitical tensions in the Middle East and other oil producing regions of the world such as Nigeria and Venezuela.
Turmoil in the financial markets, resulting from the subprime crisis in the US, continue to haunt investors.
Based on June’s prices, oil and crude palm oil (CPO) were still 99% and 32% higher respectively than the average world market prices in the same period last year. In June 2008, oil and CPO traded at about US$135 per barrel and RM3,300 per tonne, respectively.
Oil was at it highest on July 11 this year, when it traded at over US$147 per barrel while CPO was at its highest in March, when it traded at RM4,486 per tonne.
An economist with a Hong Kong-based bank told StarBiz that lower consumption from countries in the euro area and Japan did not necessarily presage a collapse in commodity prices as strong demand is still coming from emerging markets such as China and India.
“Commodities posted their best performance in more than 30 years in the first six months of this year, rising about 30%.
“In July, they had their worst month in 28 years, falling by 10%,” he said, adding that Goldman Sachs Group Inc had predicted that China’s demand for oil would grow by 5% annually.
Slower GDP growth
For Malaysia, it is the general consensus that growth would slow to between 4.5% and 5% this year compared with last year’s 6.3% while inflation, according to Bank Negara’s forecast, is expected to be between 5.5% and 6%. For the month of July, Malaysia’s inflation rose to 8.5% compared with 7.7% in June.
This of course pales in comparison to Vietnam, where inflation last month surged 28.3% amidst soaring food, housing and transportation costs. The Asian Development Bank has lowered its growth forecast for the country to 6.5% this year and 6.8% next year. Last year, the country’s economy expanded by 8.2%.
The situation is made worst by the breakdown in late July of the Doha round of talks of the World Trade Organisation because curbs on the free flow of goods and labour that this could add to the troubles of stagnating economies.
Australia and New Zealand Banking Group Ltd (ANZ) analysts led by Asia head of economics and research Paul Gruenwald said in a report that growth was slowing across most but not all of Asia with the more export-dependent open economies being the hardest hit.
“We expect growth to continue to slow into 2009 as the external environment weakens further,” he said.
According to investment bank Schroders plc, on a consensus basis, global inflation is forecast to hit 4.8% while among emerging economies, which includes China, India and a slew of Southeast Asian and Latin American countries, inflation is forecast to hit 8%.
Last year, global inflation was 2.9% while emerging economies saw inflation rising to 5.2%.
US slowdown
Schroders chief economist Keith Wade said in a report that there was increasing evidence a slowdown in the US was affecting the rest of the world, with output in Europe and Japan falling in the second quarter.
“The world economy appears to be re-coupling as evidence increases of the slowdown spreading beyond the US. Both Europe and Japan recorded a fall in GDP during the second quarter and business surveys suggest that there is worse to come,” he said.
Wade said the countries of the Organisation for Economic Cooperation and Development was facing a “coordinated downturn” while pressure was mounting in emerging economies. “In terms of changes in consensus, emerging economies are now in stagflation zone: forecasts for growth are falling while those for inflation are rising,” he added.
Meanwhile, even the six-member Gulf Cooperation Council (GCC), an important oil-producing region of the Middle East, have seen investors exiting its markets as oil price dropped but inflation continued to stay high.
“Foreign institutions are exiting emerging markets as they try to cover positions in the US,” KFH Research Ltd said in a report on the GCC.
Source: The Star Online
Date: 08/09/2008
Today, the world might be entering another period of stagflation despite lower energy and food prices as a number of countries, especially in the euro area and Japan, have reported slower growth and stock markets continue to weaken.
This time around, the world is again facing heighten geopolitical tensions in the Middle East and other oil producing regions of the world such as Nigeria and Venezuela.
Turmoil in the financial markets, resulting from the subprime crisis in the US, continue to haunt investors.
Based on June’s prices, oil and crude palm oil (CPO) were still 99% and 32% higher respectively than the average world market prices in the same period last year. In June 2008, oil and CPO traded at about US$135 per barrel and RM3,300 per tonne, respectively.
Oil was at it highest on July 11 this year, when it traded at over US$147 per barrel while CPO was at its highest in March, when it traded at RM4,486 per tonne.
An economist with a Hong Kong-based bank told StarBiz that lower consumption from countries in the euro area and Japan did not necessarily presage a collapse in commodity prices as strong demand is still coming from emerging markets such as China and India.
“Commodities posted their best performance in more than 30 years in the first six months of this year, rising about 30%.
“In July, they had their worst month in 28 years, falling by 10%,” he said, adding that Goldman Sachs Group Inc had predicted that China’s demand for oil would grow by 5% annually.
Slower GDP growth
For Malaysia, it is the general consensus that growth would slow to between 4.5% and 5% this year compared with last year’s 6.3% while inflation, according to Bank Negara’s forecast, is expected to be between 5.5% and 6%. For the month of July, Malaysia’s inflation rose to 8.5% compared with 7.7% in June.
This of course pales in comparison to Vietnam, where inflation last month surged 28.3% amidst soaring food, housing and transportation costs. The Asian Development Bank has lowered its growth forecast for the country to 6.5% this year and 6.8% next year. Last year, the country’s economy expanded by 8.2%.
The situation is made worst by the breakdown in late July of the Doha round of talks of the World Trade Organisation because curbs on the free flow of goods and labour that this could add to the troubles of stagnating economies.
Australia and New Zealand Banking Group Ltd (ANZ) analysts led by Asia head of economics and research Paul Gruenwald said in a report that growth was slowing across most but not all of Asia with the more export-dependent open economies being the hardest hit.
“We expect growth to continue to slow into 2009 as the external environment weakens further,” he said.
According to investment bank Schroders plc, on a consensus basis, global inflation is forecast to hit 4.8% while among emerging economies, which includes China, India and a slew of Southeast Asian and Latin American countries, inflation is forecast to hit 8%.
Last year, global inflation was 2.9% while emerging economies saw inflation rising to 5.2%.
US slowdown
Schroders chief economist Keith Wade said in a report that there was increasing evidence a slowdown in the US was affecting the rest of the world, with output in Europe and Japan falling in the second quarter.
“The world economy appears to be re-coupling as evidence increases of the slowdown spreading beyond the US. Both Europe and Japan recorded a fall in GDP during the second quarter and business surveys suggest that there is worse to come,” he said.
Wade said the countries of the Organisation for Economic Cooperation and Development was facing a “coordinated downturn” while pressure was mounting in emerging economies. “In terms of changes in consensus, emerging economies are now in stagflation zone: forecasts for growth are falling while those for inflation are rising,” he added.
Meanwhile, even the six-member Gulf Cooperation Council (GCC), an important oil-producing region of the Middle East, have seen investors exiting its markets as oil price dropped but inflation continued to stay high.
“Foreign institutions are exiting emerging markets as they try to cover positions in the US,” KFH Research Ltd said in a report on the GCC.
Source: The Star Online
Date: 08/09/2008
What you should do as rates fall
THE first Reserve Bank (RBA) rate cut in seven years was greeted with relief by borrowers last week. All the big banks and non-bank lenders agreed to pass on the 0.25 per cent cut in full -- and in record time.
Pressure exerted by Treasurer Wayne Swan before the announcement prompted the banks to respond within five minutes of the announcement last Tuesday.
The cut will mean a homeowner with a $300,000 mortgage will save around $55 a month in repayments, based on a 30-year term.
But the cut has also presented house-hunters -- and those looking to re-mortgage -- with a bit of a quandary. Should they stick with their variable-rate loan, or take some of the cheaper fixed-rate deals now on the market?
The typical bank variable rate will now be around 8.36 per cent, compared to the best fixed deals, which start from around 7.99 per cent -- an immediate saving for those who fix.
But economists say that the cash rate may well fall by as much as 1.5 per cent during the next year or two -- and that means variable mortgage rates could fall to around 7.11 per cent.
That lower rate, however, assumes that the banks will pass on all of the cash rate cuts -- and that is unlikely.
Last Wednesday, CBA boss Ralph Norris was emphasising that, although the RBA may well announce a series of rate cuts, the rising cost of funds on the international wholesale markets, where banks raise around one-third of their mortgage funds, means that the banks may not be able to pass on many more cash rate reductions.
"I can't guarantee anything,'' Mr Norris said. "At the moment, we have a situation where offshore funding costs have increased dramatically -- about eight-fold in margin over the last nine or 10 months, due to the overseas (sub-prime) crisis.''
It all makes the decision, for those in the market for a mortgage, much more complex even than usual.
Jennifer Nielsen, CEO of mortgage broker The Loan Market Group, says: "The cheapest fixes at the moment are around 8 per cent and you wouldn't want to fix yet. Variable rates are the way to go. The trick is to fix when you can see we are nearing the bottom of the cutting cycle -- and we are a long way from that at the moment.
"We are almost certainly looking at a downwards or, at worst, flat period in mortgage rates, so you shouldn't lock yourself into a fixed rate at current levels, unless you really need that peace of mind.''
"It all comes down to individual circumstances. The financial markets are pricing in an 80 per cent chance of another cut next month and are expecting a further two by next April, bringing the cash rate down to 6.25 per cent.
Frank Lopez, of financial data firm Cannex, says borrowers can get the cheapest variable rate, if they go for a deal with no bells or whistles -- just a clean repayment mortgage.
Wizard is offering a rate-breaker loan at 7.88 per cent, with a fee of $760. One Direct Home Loans is offering a rate of 8.61 per cent, but with a fee of just $60. These deals have minimal features, but also competitive rates.
"Many people who take mortgages with lots of additional features, such as redraw or payment holidays never actually use them -- or don't use them enough to justify the higher rate they pay for the privilege,'' Mr Lopez says. "Think hard before paying for any extra features at all.''
Savers
While borrowers may be celebrating the rate cuts, the future looks less rosy for those banking their pennies.
Savings accounts rates have already been falling and may fall rapidly as further cuts kick in. But there were some good deals available this week.
Many planners advised those who depended on savings accounts to boost their income to lock into a term deposit account before rates fell any lower.
Paul Bilson, of Woodward Nhill Financial Planning, said he favoured a mixture of term deposits and income funds.
"Sure, put part of your money into term deposits, but remember there will be penalties if you need to access your cash," he said.
Mr Bilson said most income funds, which primarily invest in mortgage debt, were returning seven to 8 per cent
"There is a little more risk," Mr Bilson said.
"They are not guaranteed - you have to make certain that the one you choose is very well rated."
He said companies including Mariner, Axa and Colonial First State all ran good funds invested in quality loans, fixed interest securities and cash.
Investors
Usually a rate cut is welcomed by the stock market because it makes the returns on cash less attractive and so forces more money into the stock market.
But after the cut on Tuesday, the market finished marginally down and fell further later in the week, stripping 5 per cent off Australian stocks.
It was the worst result since the major index fell 5.53 per cent in March.
Shane Oliver, chief economist at AMP Capital, said: "It is difficult to escape the bad news in the economy, which is going to make it harder for companies to grow their profits, and that will act as a drag on the stock market for some time."
He said retail and discretionary spending would be hit hard by an economic slowdown.
"Unemployment will rise, but these things do not last forever," Mr Oliver said.
Source: news.com.au
Date: 08/09/2008
Pressure exerted by Treasurer Wayne Swan before the announcement prompted the banks to respond within five minutes of the announcement last Tuesday.
The cut will mean a homeowner with a $300,000 mortgage will save around $55 a month in repayments, based on a 30-year term.
But the cut has also presented house-hunters -- and those looking to re-mortgage -- with a bit of a quandary. Should they stick with their variable-rate loan, or take some of the cheaper fixed-rate deals now on the market?
The typical bank variable rate will now be around 8.36 per cent, compared to the best fixed deals, which start from around 7.99 per cent -- an immediate saving for those who fix.
But economists say that the cash rate may well fall by as much as 1.5 per cent during the next year or two -- and that means variable mortgage rates could fall to around 7.11 per cent.
That lower rate, however, assumes that the banks will pass on all of the cash rate cuts -- and that is unlikely.
Last Wednesday, CBA boss Ralph Norris was emphasising that, although the RBA may well announce a series of rate cuts, the rising cost of funds on the international wholesale markets, where banks raise around one-third of their mortgage funds, means that the banks may not be able to pass on many more cash rate reductions.
"I can't guarantee anything,'' Mr Norris said. "At the moment, we have a situation where offshore funding costs have increased dramatically -- about eight-fold in margin over the last nine or 10 months, due to the overseas (sub-prime) crisis.''
It all makes the decision, for those in the market for a mortgage, much more complex even than usual.
Jennifer Nielsen, CEO of mortgage broker The Loan Market Group, says: "The cheapest fixes at the moment are around 8 per cent and you wouldn't want to fix yet. Variable rates are the way to go. The trick is to fix when you can see we are nearing the bottom of the cutting cycle -- and we are a long way from that at the moment.
"We are almost certainly looking at a downwards or, at worst, flat period in mortgage rates, so you shouldn't lock yourself into a fixed rate at current levels, unless you really need that peace of mind.''
"It all comes down to individual circumstances. The financial markets are pricing in an 80 per cent chance of another cut next month and are expecting a further two by next April, bringing the cash rate down to 6.25 per cent.
Frank Lopez, of financial data firm Cannex, says borrowers can get the cheapest variable rate, if they go for a deal with no bells or whistles -- just a clean repayment mortgage.
Wizard is offering a rate-breaker loan at 7.88 per cent, with a fee of $760. One Direct Home Loans is offering a rate of 8.61 per cent, but with a fee of just $60. These deals have minimal features, but also competitive rates.
"Many people who take mortgages with lots of additional features, such as redraw or payment holidays never actually use them -- or don't use them enough to justify the higher rate they pay for the privilege,'' Mr Lopez says. "Think hard before paying for any extra features at all.''
Savers
While borrowers may be celebrating the rate cuts, the future looks less rosy for those banking their pennies.
Savings accounts rates have already been falling and may fall rapidly as further cuts kick in. But there were some good deals available this week.
Many planners advised those who depended on savings accounts to boost their income to lock into a term deposit account before rates fell any lower.
Paul Bilson, of Woodward Nhill Financial Planning, said he favoured a mixture of term deposits and income funds.
"Sure, put part of your money into term deposits, but remember there will be penalties if you need to access your cash," he said.
Mr Bilson said most income funds, which primarily invest in mortgage debt, were returning seven to 8 per cent
"There is a little more risk," Mr Bilson said.
"They are not guaranteed - you have to make certain that the one you choose is very well rated."
He said companies including Mariner, Axa and Colonial First State all ran good funds invested in quality loans, fixed interest securities and cash.
Investors
Usually a rate cut is welcomed by the stock market because it makes the returns on cash less attractive and so forces more money into the stock market.
But after the cut on Tuesday, the market finished marginally down and fell further later in the week, stripping 5 per cent off Australian stocks.
It was the worst result since the major index fell 5.53 per cent in March.
Shane Oliver, chief economist at AMP Capital, said: "It is difficult to escape the bad news in the economy, which is going to make it harder for companies to grow their profits, and that will act as a drag on the stock market for some time."
He said retail and discretionary spending would be hit hard by an economic slowdown.
"Unemployment will rise, but these things do not last forever," Mr Oliver said.
Source: news.com.au
Date: 08/09/2008
Wednesday, September 3, 2008
What You Need to Know About Credit Scores
You've probably realized by now that your principal in high school was full of it when he or she warned you about your "permanent record." There is no such thing.
But there is, in a way. It has nothing to do with cutting class or smoking out by the football field. It's called your credit report, and it shows your current credit accounts, outstanding debts, and payment history going back for several years. Credit cards, student loans, auto loans: They're all there, and if you have a problem paying any other kind of bill or have an overdraft on your checking account, it will show up, too.
High Score
So why is this important? Well, credit reports yield credit scores, a powerful little three-digit number ranging from 300 to 850. A bad credit score -- less than 620 is considered subprime -- will have you paying 10.99 percent interest on a car loan when your friend with squeaky-clean credit is paying 6 percent, or 29 percent on a credit card when your friend's card charges 12 percent.
Credit scores can also affect your rates for mortgages and home, auto, and life insurance.
And increasingly, bosses are conducting credit checks when they make hiring decisions.
Credit scores are a great scam for the credit card industry. Without fail, when I give a talk on college campuses about the dangers of credit cards, someone in the audience asks, "But don't we need a credit card to build a good credit score?" And I have to say, well, yes. You need those credit cards to get a mortgage or an auto loan down the road. But you don't have to run up any balances! The most cautious thing to do is to use your credit cards to make a regular payment, like a cell phone bill, and then set up automatic bill paying online each month.
There are lots of businesses, some fraudulent, offering to "repair" your credit.
But as the Federal Trade Commission wants you to know, self-help is the best approach. Here's what you can do:
The Score Decoded
Requesting your credit reports and scores is a good way to start taking control of your money. There is one most common credit score used by banks to make decisions: the FICO score, developed originally by Fair Isaac Corporation.
FICO scores, once again, range from 300 to 850. Three different credit bureaus combine information from credit card companies and banks to make credit reports: TransUnion, Experian, and Equifax. Each of these bureaus may have slightly different information on you in their reports, which yields a different score. The Equifax score is seen by some as being most similar to what banks actually see when they pull your credit report.
By federal law, you are entitled to one free copy of your credit report each year from each of the credit bureaus. Go to annualcreditreport.com to request them. You will have to pay about $7.95 a pop to see the scores as well.
To write this column, I pulled my free credit report from TransUnion. It's pretty easy to read, showing my name, Social Security number, and current address, as well as two previous addresses and the payment history for my credit cards: a Capital One Visa, a Chase/Bank One Visa, and a Washington Mutual card that I've since canceled. I don't have any balances on the cards right now, and I have made nearly all on-time payments. But my credit score is only 705, shy of the "excellent" cutoff of 720.
This is primarily because last year I traveled out of the country, moved apartments, and forgot to pay a $40 charge on my Capital One Visa. The payment went overdue for 90 days, until Capital One finally reached me on the phone. So now I am patiently repaying my cards on time each month, via automatic direct debit, and waiting for my score to improve. On the advice of TransUnion, I'm also going to open another credit card to increase my available credit, which could help improve my score.
The Breakdown
Your credit score is based on several factors, many of which will hit Generation Debt harder than older folks.
1. Payment history -- the biggie, about 35 percent of a FICO score. Also the no-brainer: Any late payments or overdrafts, like mine, will ding your credit score for several years.
2. Amount owed -- about 30 percent
This figure compares the amount you owe to your available credit. So someone who has a $2,000 balance and a $2,000 credit limit -- they're maxed out -- will look worse than someone who owes $3,000 but has cards with $30,000 worth of limits. This may hurt folks with large student loan balances. It's also the reason that you don't necessarily want to close accounts after you pay them off -- it's better to leave them dormant to raise your available credit.
3. Length of history -- about 15 percent
The longer your perfect record of on-time payments, the better your score -- so if you've only been out of school for a couple of years, your credit score won't be as high as it can be down the road if you keep it clean.
4. New credit -- about 10 percent
Repeatedly shopping for credit -- either credit cards or bank loans -- can hurt your score because it makes you look desperate. I learned this the hard way when I got out of college. I had smugly avoided signing up for a student credit card. Well, suddenly I was a freelance writer's assistant, with no regular income. I applied for and was rejected from so many cards in the first few months out of school that I was told I couldn't file any more applications for six months. I finally got a Capital One Visa with a $300 limit. All of this probably hurt my credit.
Message: Confine your credit card shopping to 30 days, and, yes, get a student card if you're in school.
5. Miscellaneous-- about 10 percent
This includes stuff like having a nice "mix" of credit cards, auto loans, and other types of credit.
Mr. Fix-It
First, make sure your report has no mistakes. The Public Interest Research Group found in 2004 that 79 percent of credit reports had some kind of mistake. One out of four had a serious error that could lead to denial of credit.
If you're young and have never requested it before, your credit report may contain information from someone else with the same name. Or there may be duplicate information.
Evan Hendricks, an expert who wrote the book "Credit Scores and Credit Reports", told Bankrate.com that student loan borrowers especially have to watch out:
"Student loan information will sometimes multiply like rabbits on the credit report because student loans are sold from one company to another, and the old company continues reporting and then the new company continues reporting it, and it might make it look like you have more loans than you actually do. Then if they're showing any late payments, you can get hit with double whammies on late payments as well."
If you have a mistake, you need to send a dispute letter to the credit bureau and ask them to "reinvestigate" it. Include copies of any supporting evidence like your drivers license. Keep records of everything in writing. You can also request that the bureaus include a note in your file to help explain any delinquencies -- e.g., you were taking care of a sick parent or were unemployed. "Credit Scores and Credit Reports" has all the info on how to do this for free, yourself.
If your credit report is accurate, do what I'm doing now. Set up automatic direct debit to pay all your bills on time, on the day they're due. Start paying down your credit card balances, starting with the highest-interest cards, paying at least $10-$15 over the minimum each month. But don't close any accounts -- remember, you need a high ratio of available credit to used credit.
Take courage. It doesn't happen overnight, but after seven years, most blemishes on your credit report -- even bankruptcies -- are erased by your most recent payment history. Take comfort in the fact that there isn't really a permanent record after all.
But there is, in a way. It has nothing to do with cutting class or smoking out by the football field. It's called your credit report, and it shows your current credit accounts, outstanding debts, and payment history going back for several years. Credit cards, student loans, auto loans: They're all there, and if you have a problem paying any other kind of bill or have an overdraft on your checking account, it will show up, too.
High Score
So why is this important? Well, credit reports yield credit scores, a powerful little three-digit number ranging from 300 to 850. A bad credit score -- less than 620 is considered subprime -- will have you paying 10.99 percent interest on a car loan when your friend with squeaky-clean credit is paying 6 percent, or 29 percent on a credit card when your friend's card charges 12 percent.
Credit scores can also affect your rates for mortgages and home, auto, and life insurance.
And increasingly, bosses are conducting credit checks when they make hiring decisions.
Credit scores are a great scam for the credit card industry. Without fail, when I give a talk on college campuses about the dangers of credit cards, someone in the audience asks, "But don't we need a credit card to build a good credit score?" And I have to say, well, yes. You need those credit cards to get a mortgage or an auto loan down the road. But you don't have to run up any balances! The most cautious thing to do is to use your credit cards to make a regular payment, like a cell phone bill, and then set up automatic bill paying online each month.
There are lots of businesses, some fraudulent, offering to "repair" your credit.
But as the Federal Trade Commission wants you to know, self-help is the best approach. Here's what you can do:
The Score Decoded
Requesting your credit reports and scores is a good way to start taking control of your money. There is one most common credit score used by banks to make decisions: the FICO score, developed originally by Fair Isaac Corporation.
FICO scores, once again, range from 300 to 850. Three different credit bureaus combine information from credit card companies and banks to make credit reports: TransUnion, Experian, and Equifax. Each of these bureaus may have slightly different information on you in their reports, which yields a different score. The Equifax score is seen by some as being most similar to what banks actually see when they pull your credit report.
By federal law, you are entitled to one free copy of your credit report each year from each of the credit bureaus. Go to annualcreditreport.com to request them. You will have to pay about $7.95 a pop to see the scores as well.
To write this column, I pulled my free credit report from TransUnion. It's pretty easy to read, showing my name, Social Security number, and current address, as well as two previous addresses and the payment history for my credit cards: a Capital One Visa, a Chase/Bank One Visa, and a Washington Mutual card that I've since canceled. I don't have any balances on the cards right now, and I have made nearly all on-time payments. But my credit score is only 705, shy of the "excellent" cutoff of 720.
This is primarily because last year I traveled out of the country, moved apartments, and forgot to pay a $40 charge on my Capital One Visa. The payment went overdue for 90 days, until Capital One finally reached me on the phone. So now I am patiently repaying my cards on time each month, via automatic direct debit, and waiting for my score to improve. On the advice of TransUnion, I'm also going to open another credit card to increase my available credit, which could help improve my score.
The Breakdown
Your credit score is based on several factors, many of which will hit Generation Debt harder than older folks.
1. Payment history -- the biggie, about 35 percent of a FICO score. Also the no-brainer: Any late payments or overdrafts, like mine, will ding your credit score for several years.
2. Amount owed -- about 30 percent
This figure compares the amount you owe to your available credit. So someone who has a $2,000 balance and a $2,000 credit limit -- they're maxed out -- will look worse than someone who owes $3,000 but has cards with $30,000 worth of limits. This may hurt folks with large student loan balances. It's also the reason that you don't necessarily want to close accounts after you pay them off -- it's better to leave them dormant to raise your available credit.
3. Length of history -- about 15 percent
The longer your perfect record of on-time payments, the better your score -- so if you've only been out of school for a couple of years, your credit score won't be as high as it can be down the road if you keep it clean.
4. New credit -- about 10 percent
Repeatedly shopping for credit -- either credit cards or bank loans -- can hurt your score because it makes you look desperate. I learned this the hard way when I got out of college. I had smugly avoided signing up for a student credit card. Well, suddenly I was a freelance writer's assistant, with no regular income. I applied for and was rejected from so many cards in the first few months out of school that I was told I couldn't file any more applications for six months. I finally got a Capital One Visa with a $300 limit. All of this probably hurt my credit.
Message: Confine your credit card shopping to 30 days, and, yes, get a student card if you're in school.
5. Miscellaneous-- about 10 percent
This includes stuff like having a nice "mix" of credit cards, auto loans, and other types of credit.
Mr. Fix-It
First, make sure your report has no mistakes. The Public Interest Research Group found in 2004 that 79 percent of credit reports had some kind of mistake. One out of four had a serious error that could lead to denial of credit.
If you're young and have never requested it before, your credit report may contain information from someone else with the same name. Or there may be duplicate information.
Evan Hendricks, an expert who wrote the book "Credit Scores and Credit Reports", told Bankrate.com that student loan borrowers especially have to watch out:
"Student loan information will sometimes multiply like rabbits on the credit report because student loans are sold from one company to another, and the old company continues reporting and then the new company continues reporting it, and it might make it look like you have more loans than you actually do. Then if they're showing any late payments, you can get hit with double whammies on late payments as well."
If you have a mistake, you need to send a dispute letter to the credit bureau and ask them to "reinvestigate" it. Include copies of any supporting evidence like your drivers license. Keep records of everything in writing. You can also request that the bureaus include a note in your file to help explain any delinquencies -- e.g., you were taking care of a sick parent or were unemployed. "Credit Scores and Credit Reports" has all the info on how to do this for free, yourself.
If your credit report is accurate, do what I'm doing now. Set up automatic direct debit to pay all your bills on time, on the day they're due. Start paying down your credit card balances, starting with the highest-interest cards, paying at least $10-$15 over the minimum each month. But don't close any accounts -- remember, you need a high ratio of available credit to used credit.
Take courage. It doesn't happen overnight, but after seven years, most blemishes on your credit report -- even bankruptcies -- are erased by your most recent payment history. Take comfort in the fact that there isn't really a permanent record after all.
Tax breaks to buy first home
This is the first of a three-part question-and-answer series provided by PricewaterhouseCoopers for The Star readers on various aspects of Budget 2009.
Q: My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.
A: If you are buying a low-cost house, you will get full stamp duty exemption on all documents, including loan agreements. However, if you are buying a medium-cost house of up to RM250,000, you will get a 50% stamp duty exemption on the loan agreement, in addition to the 50% stamp duty exemption on the sale and purchase agreement currently available. However, you need to be a Malaysian citizen to be eligible for the exemption and it is limited to the purchase of one residential property only. Please note that the stamp duty exemption is effective for sale and purchase agreements executed from Aug 30, 2008, to Dec 31, 2010.
As you do not have a fixed income, you may benefit from the Housing Credit Guarantee Scheme, which is a fund set up to assist those without fixed income to obtain housing loans from any financial institutions to purchase low- and medium-cost houses.
Q: I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?
A: Your rental income would be subject to tax in Malaysia as it is a Malaysian sourced income. Prior to 2009, your rental income will be taxed at a non-resident rate of 28%. However, under the proposed legislation, your non-resident tax rate will be reduced to 27% in year of assessment 2009.
Q: I have just started working and my total income for 2009 is RM30,000. Will I be eligible for the tax rebate?
A: An individual whose chargeable income is below RM35,000 would be eligible for a tax rebate. Currently, the tax rebate is RM350 per annum. Under the proposed legislation, the tax rebate would be increased to RM400 per annum for 2009. The tax rebate reduces your actual tax payable amount.
Q: I am a marketing executive and my employer pays me a fixed monthly petrol allowance of RM600 (RM7,200 a year) to cover my travel expenses relating to my official duties. In the past, my employer reports this allowance in my Form EA. How will I be impacted by the new proposal?
A: Under the proposal, with effect from 2008, the travel allowance paid by employers for official duties will be exempted from tax up to RM6,000 per annum. The excess of RM1,200 would be taxable on you. However, petrol and travel allowance from home to work is exempted up to RM2,400 per year.
Q: I represent a company which operates a fleet of buses. However, I do not own these buses but I lease these buses from a company which acquires these buses from a local manufacturer. What would be the sales tax implications of the present proposal to me as the operator?
A: The Budget announcement proposes that only bus operators are eligible to apply for the exemption. There is no specific mention in the proposal that bus operators who are not owners of the buses can take benefit. However, as the application is approved on merits, the bus owner may apply for the exemption from the Finance Ministry. If approval is granted, it should result in lower leasing charges.
Q: I heard that Reinvestment Allowance (RA) will be abolished. Is this true?
A: Reinvestment Allowance is still available for a consecutive period of 15 years from the year the first RA is claimed for companies embarking on qualifying project of expansion, automation, modernisation or diversification. However, the criteria and conditions have been amended as follows:
> A company must be in operation for at least 36 months (as opposed to 12 months previously) to be eligible for RA claim;
> A company purchasing an asset from a related company with the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset; and RA will be clawed back if the asset is disposed of within five years (as opposed to two years previously).
You would note that while the RA is still available, stricter conditions have been imposed from year of assessment 2009 onwards.
Q: My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.
A: If you are buying a low-cost house, you will get full stamp duty exemption on all documents, including loan agreements. However, if you are buying a medium-cost house of up to RM250,000, you will get a 50% stamp duty exemption on the loan agreement, in addition to the 50% stamp duty exemption on the sale and purchase agreement currently available. However, you need to be a Malaysian citizen to be eligible for the exemption and it is limited to the purchase of one residential property only. Please note that the stamp duty exemption is effective for sale and purchase agreements executed from Aug 30, 2008, to Dec 31, 2010.
As you do not have a fixed income, you may benefit from the Housing Credit Guarantee Scheme, which is a fund set up to assist those without fixed income to obtain housing loans from any financial institutions to purchase low- and medium-cost houses.
Q: I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?
A: Your rental income would be subject to tax in Malaysia as it is a Malaysian sourced income. Prior to 2009, your rental income will be taxed at a non-resident rate of 28%. However, under the proposed legislation, your non-resident tax rate will be reduced to 27% in year of assessment 2009.
Q: I have just started working and my total income for 2009 is RM30,000. Will I be eligible for the tax rebate?
A: An individual whose chargeable income is below RM35,000 would be eligible for a tax rebate. Currently, the tax rebate is RM350 per annum. Under the proposed legislation, the tax rebate would be increased to RM400 per annum for 2009. The tax rebate reduces your actual tax payable amount.
Q: I am a marketing executive and my employer pays me a fixed monthly petrol allowance of RM600 (RM7,200 a year) to cover my travel expenses relating to my official duties. In the past, my employer reports this allowance in my Form EA. How will I be impacted by the new proposal?
A: Under the proposal, with effect from 2008, the travel allowance paid by employers for official duties will be exempted from tax up to RM6,000 per annum. The excess of RM1,200 would be taxable on you. However, petrol and travel allowance from home to work is exempted up to RM2,400 per year.
Q: I represent a company which operates a fleet of buses. However, I do not own these buses but I lease these buses from a company which acquires these buses from a local manufacturer. What would be the sales tax implications of the present proposal to me as the operator?
A: The Budget announcement proposes that only bus operators are eligible to apply for the exemption. There is no specific mention in the proposal that bus operators who are not owners of the buses can take benefit. However, as the application is approved on merits, the bus owner may apply for the exemption from the Finance Ministry. If approval is granted, it should result in lower leasing charges.
Q: I heard that Reinvestment Allowance (RA) will be abolished. Is this true?
A: Reinvestment Allowance is still available for a consecutive period of 15 years from the year the first RA is claimed for companies embarking on qualifying project of expansion, automation, modernisation or diversification. However, the criteria and conditions have been amended as follows:
> A company must be in operation for at least 36 months (as opposed to 12 months previously) to be eligible for RA claim;
> A company purchasing an asset from a related company with the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset; and RA will be clawed back if the asset is disposed of within five years (as opposed to two years previously).
You would note that while the RA is still available, stricter conditions have been imposed from year of assessment 2009 onwards.
Minister's Reaction on Budget 2009
Datuk Seri Najib Tun Razak comments on the people-centric budget and denies that the large allocation for East Malaysia is politically motivated.
Public reaction on budget 2009 announcement
Thestar online TV crew step to the streets to find out what people have to say on the Budget 2009 announcement.
Budget 2009 roundtable discussion - Part 3
Join Jagdev Singh Sidhu for the roundtable discussion on the newly-announced 2009 budget.
Budget 2009 roundtable discussion - Part 2
Join Jagdev Singh Sidhu for the roundtable discussion on the newly-announced 2009 budget.
Budget 2009 roundtable discussion - Part 1
Join Jagdev Singh Sidhu for the roundtable discussion on the newly-announced 2009 budget.
PM tables 2009 budget
Prime Minister Datuk Seri Abdullah Ahmad Badawi tables the 2009 budget on Friday. The new budget is aimed at easing the rakyat's burden and help SME's cope with rising costs.
The Economic Report
Elaine Ang presents the Economic Report. The economy is expected to grow at 5.7 in 2008 and at a slower pace of 5.4 percent in 2009.
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