Wednesday, May 27, 2020

open banking

Do you know what Open Banking is, or how it's set to impact you? Open Banking could be just about the biggest thing that's happened in the Australian finance industry this century - so it's probably a good idea that you have an understanding of exactly what it is, and what it means for you. 

Regulatory changes, tech-driven innovation and evolving consumer preferences have all led to this new development, which will make the usually quite secretive and hard-to-navigate finance world much more accessible to the average person.

Essentially, Open Banking gives consumers unprecedented access to, and power over, their data. 

In a nutshell, you'll be able to share your selected banking data with accredited third parties (a process known as read access) and benefit from the new products, services and competition this change will generate. 

But why is Open Banking important? How did it come about - and what will the end result be for borrowers?

The open data economy

Open Banking forms part of the Consumer Data Right (CDR), which was passed by the Federal parliament in August 2019 and covers the telecommunications, utilities and banking industries. 

That's a real mouthful, but what this legislation represents is a major step towards an open data economy in our increasingly interconnected, online world. The UK and the European Union are already enjoying the benefits of Open Banking systems, so it's about time we caught up!

The ACCC has given the four major banks from the 1st of February 2020 to the 1st of July 2020 to implement the sharing of consumer data, and will review the rest of the rollout through the year. Other banks and lenders will be ringing in the changes from 2021. 

Savings accounts, term deposits and credit cards will be among the first products to join the Open Banking ranks, followed by mortgages and personal loans, and eventually business and investment accounts, retirement savings accounts and trusts. 

By 2022, we should have a fully-functioning Open Banking system, and the ACCC will move on to applying the CDR to other sectors such as utilities. 

True transparency

Open Banking is a much more transparent system than we currently have. You will be able to instruct your bank to send your data to other banks, financial institutions and authorised organisations, so that signing up for a new mortgage, personal loan, credit card or bank account will be much simpler. 

Instead of chasing up personal indentification documents or printing out page after page of transaction records, you will be able to direct your bank to send your data directly to the new institution on your behalf - a massive time-saver. 

You will also find that the process of comparing products and services should become much easier. Working with an experienced and qualified mortgage broker remains the most effective way to get the best possible loan for your situation, as we are in the industry being updated on the latest market changes and credit card movements every day, which means we can direct you towards the loan product (and the lender) that best suits your needs. 

However, Open Banking is a massive step in the right direction for a more robust and competitive banking industry overall, and I think we can all agree, that's good news for borrowers. 

The nitty gritty: Did you know?

  • Relevant privacy legislation applies to Open Banking, and you are always in control of your data - organisations you are involved with can only send or receive your information at your request, and must be authorised under the government's strict security protocols. 
  • The CDR doesn't allow for what's known as write access - that is, you won't be able to authorise accredited third parties to initiate payments or change account providers on your behalf. While this is part of the legislation in the UK and EU, and may be on the cards here in the future, for now Open Banking is purely a matter of data sharing.
  • Look out for consumer education campaign coming this year, which is designed to help you work out how Open Banking will impact you, or chat to your broker or financial planner for more information.

 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence No. 391237).

homeowner

When you are looking for your first or next investment property, you are probably trying to approach each inspection through your potential tenant's eyes. Will people want to live here? Will they pay a premium rent for these particular features and amenities? Will they love it so much that they will stay long-term, saving you the bother and expense of advertising for new tenants... And of course, how much of a return will the property pay?

These are all valid and important questions. But unless you plan on holding onto the property forever, eventually you will need to sell it. And it might surprise you to learn it will more than likely to be a homeowner, not an investor, who takes it off your hands. 

Contrary to what media would have us believe, the real estate market is not dominated by investors. Most people out there actively in the market are actually buying homes to live in - investors do not have anything near a monopoly over the Australian property market. 

In fact, owner occupiers drive the market, as they comprise 70 per cent of buyers. So, it makes sense to look for properties that appeal to these buyers - otherwise you are narrowing your pool of sellers and potentially sabotaging your capital growth. 

Buyer's agent Brady Yoshia says that considering owner occupier appeal is important when purchasing any property, be it to live in yourself or as an investment. 

"From an investment perspective, to attract high-quality tenants the property needs to meet their desired lifestyle and accommodation needs," Brady advises. 

"Tenants are more discerning than ever, and if you wouldn't like to live in the property due to its condition or location, other people will no doubt feel the same."

Brady says that this applies to both tenant and future owner occupiers, and also suggests that it's a good idea to consider how you would feel personally about living there, just in case you find yourself in the position where you need to move into the property down the track. 

So, how do you identify such a property?

Brady says there are a number of features that owner occupiers will be on the lookout for, including:

  • Location and aspect of the home
  • Access to public transport options
  • Potential for future growth
  • For houses, the size of the block

If you are thinking of buying a very unusual property, perhaps because it is on the more affordable side or because it meets your unique requirements, then consider whether this will appeal to future buyers - or are you potentially selling yourself short?

Beyond these factors, Brady says it is important to know what is happening in the area, from a development and population growth perspective - for example, are there any significant infrastructure upgrades planned, which might affect access or liveability? You can also enquire with the local council to find out if there are any large-scale development applications in the pipeline. 

When imagining your future buyers, consider all the possibilities - professional couples, young families and even retirees and downsizers. Shops and essential amenities like doctors, banks and Centrelink offices should all be relatively easy to get to, along with at least two options for commuters such as a main highway and a train station. 

"Areas that have owner occupier appeal are usually within the catchment area for good schools," adds Brady; you can find maps online that will show you where these boundaries lie. 

Public transport and access to universities and commercial hubs and proximity to hospitals are also important, which areas such as the CBD, Parramatta, Chatswood and Macquarie Park in Sydney all being good examples of suburbs with both owner occupier and investor appeal. In Melbourne, houses near coveted schools such as Box Hill High and Balwyn High are always in demand, along with anything in the sunny bayside area. 

But regardless of the specific city, keep in mind that it is owner occupiers that drive the market. If you want a property that has wide appeal now and in the future, then it pays to keep both renters and homeowners in mind when shopping for your next property investment. 

 

This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation or needs before making any decisions based on this information. 

Louisa J Sanghera is a credit representative (437236) of BLSSA Pty Ltd AC 117651760 (Australian Credit Licence No. 391237). 

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Contact Details

Zippy Finance 

PO Box 3078
North Turramurra
NSW 2074

T 1300 855 022 

Louisa Sanghera is a credit representative (437236) of BLSSA Pty Ltd ACN 117 651 760.  Australian Credit Licence 391237. ABN 85 168 278 975.

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