Boothy Bites Episode 11 - Positive trends | Lender scenarios | Plans & Successes

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[Jackie] Hi everyone, and welcome to Boothy’s Bites for February. Hey, Boothy. How's things?

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[Chris] Hey, Jackie. Yeah, happy February to everybody. And yeah, look, another episode. It seems to be flying by already. 2024, huh?

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[Jackie] Well, we're not. We have Santa hats on again for December. (laughs)

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[Chris] It's funny. I was looking at the Lydian beanies there, so, you know, if you if you are watching this, which probably no one will get your orders in to book a Lydian beanie, you know, because they'll be going really fast I'm sure.

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[Jackie] They were flying out the door. So get them for your ski tips in winter. Anyways, on with Boothy’s Bites: can you tell us what's the latest with interest rates?

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[Chris] Yes. Well, we had the meeting yesterday, which was really good to say, really. I mean, look, every month we've been the last few months, we've been talking about the same thing. So it's kind of like “eugh, boring, boring”. But the cool thing about it is all the things we've been talking about happening are happening, which is cool. So the inflation rate is coming down...

00;00;59;20 - 00;01;20;06
...the RBA, they're still watching that number, but they seem to be comfortable with it right now. I do think that the commentary yesterday was a little bit sterner with a warning to say, look, the doors still open potentially if the inflation doesn't continue to go down to potentially increase interest rates again. But it was a really sort of passive comment, not a firm comment.

00;01;20;08 - 00;01;48;16
So yeah, it's kind of getting boring, boring, same sort of thing. But the really positive thing out of it is that no change in interest rates, again, I think really it's a wait and see to watch these numbers come down and you know, the interest rates in the marketplace have fallen quite considerably as well. So even though the RBA cash rate is at 4.35%, the government bond market, which is sort of a measure of future interest rates, has really fallen away.

00;01;48;16 - 00;02;12;03
So they're actually less than the cash rate right now. So we're seeing two year bonds at 3.8%, three year bonds at 3.7%, so that forecast for interest rates is fairly firmly to be lower, which is really cool for us all. And that has a flow on effect. Obviously for interest rates. As to the really cool thing, I think which has been sort of announced and sort of ratified over the last few weeks has been the tax breaks that we're all going to get.

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So as low and middle income earners, which I'm certainly not being self-employed, you know, I'm not high income earner, we all get a bit of a tax break in July, which will be really nice as well. So on one hand, we've got the RBA. Yeah, exactly. Get some money back in the pocket. Let's order our flat screen TVs from JB Hi-Fi or a pair of new Bose headphones or whatever it needs to be.

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And get cracking. Yeah, get that money spent.

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[Jackie] Sounds good. All these remarks about, you know, boring and repetitive messaging, it's almost like, you know what you're talking about Boothy, because you're calling it exactly as they're calling it. So who knew you were actually quite good at your job?

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[Chris] You don't get the gray beard and the bald head. I can see the shiny bits on the top here. That's you know, that's my knowledge. You know, for 25 years I've been in the game. There you go.

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[Jackie] Yeah, I'm not as knowledgeable as you.

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[Chris] I get it wrong quite a lot but anyway still.

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[Chris] So what can you tell us about some of the lenders and some of the moves they've been making at the moment?

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[Chris] Yes. So again, so that's been really nice. We now seem to be able to get a quite level playing field of interest rates, which is really cool. The major banks being sort of your NAB, ANZ, CBA, St George Bank, Westpac, etc., they're all pricing it discretionary for discounts. The more you borrow, the lower the risk being loan to value ratio, the better they're pricing.

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So we're talking sort of any deals over $1,000,000, they're offering some really good rates. So that's a bit more bespoke. But some of the I suppose the non-large banks; Heritage Bank have got a really cool rate at 5.99% variable for... that's an own home rates. Adelaide Bank again you know that's Adelaide Bendigo they're really supporting home borrowers.

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They've got a 6.09% variable P and I as well. And you know, I'm not suggesting that it's a time to fix, but if people are sort of worried about cash flow and things like that and want to have a conversation about you know, maybe hedging their bets a bit, the fixed rates are now slightly less. So we do have a five year and a three year fixed at 5.99%, which some people might want to consider.

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But also, I think, you know, if you're speaking to your mortgage broker now, maybe start to think about what would a would a fixed rate look like for you to be happy with? And over the next of 3 to six months, I do believe we'll start to see those drop a little bit lower as well. So, again, you know, that's the first time we've had rates in the under 6% fixed for many, many months, which might suit some people if they want some advice.

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And then for our investors, you generally pay a bit more for the investor loans. But we've got Beyond Bank who've got a 6.14% variable which is a good one. Bank of Queensland, they've got a couple of fixed rates at 6.14% as well. So again, you know, if you want a cash flow and sort of hedge your bets and then interest only for that invested debt, we've got Bankwest, which is offering a great 6.44% as well.

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So a few rates there and anyone investing in self-managed super funds, you know, reach out to this specialist product. But we've got a 7.09% P.A. variable there too. So some real sexy rates, if you can call them sexy. I don't know. Are they sexy?

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[Jackie] Well, it is the month of Valentine's Day. I'll take it.

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[Chris] The lovely rates. Lovely.

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[Jackie] Right, lovely rates! Let's go with that. And so what are some positive scenarios that have played out recently for some of our Lydian clients?

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[Chris] Yeah, good question. So again, you know, most of the time we're working with normal lenders, normal scenarios and working through, you know, trying to find the best rate. But sometimes even though we're trying to find the best rate, the credit policy of the lenders may not allow us to do what we want to do. So a couple of quick niches that we've, you know, kind of stumbled across, really.

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Firstly, we had a husband and wife who their incomes were pretty strong, but we still couldn't demonstrate affordability at that sort of nine, nine and a half percent interest rate, which the banks needed us to. The client still wanted a really cheap rate and they’ve committed to buying an investment property which, you know, when, when they committed interest rates were a bit cheaper and probably be able to demonstrate affordability. In this new environment...

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...now, we were struggling to sort of get the investment debt in place to buy this property. Now, interestingly, the female applicant, she works at a large tech firm, so I'm talking like Google, Salesforce, you know, all of these sort of U.S. companies. And as part of her salary package, she got given share op- shares in a in a plan on a regular basis.

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I think it was like quarterly or half yearly. Now, these shares had slowly started to what's called vest, and that means you're given the shares today, but you're not allowed to actually have those shares and access to those shares to sell, sorry, on the market until sort of 12 months, 18 months post when you got given them. But anyway, we found a lender who would actually utilize the shares which were vesting and the schedule of the shares which invested over the last couple of years to actually complement the other income stream that the female applicant was using as well to service the loan.

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So the cool thing about that was we're able to actually 1.) state a main bank, 2.) use a really unique policy to get them placed and 3.) get them a really great interest rate to borrow the extra money they wanted. So that was a really, really good outcome for the client as well. And well done to the broker who sort of worked through that deal with the lender too.

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[Jackie] Yeah, amazing. A win for everyone. And so what's the latest with Lydian HQ?

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[Chris] I just I'll give you one more. Sorry, I forgot. They've got a new one if and the other one.

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[Jackie] I was coming out of that. Out of that.

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[Chris] Yeah. So the other one as well is self-employed lending. Okay. So if you're self-employed a lot of time the lenders will actually ask for your company financials as well. You know, your profit and loss and balance sheet as well. And there are now a couple of lenders who will just allow if the company's paying a wage to the directors.

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Okay. So the company itself is just paying a wage on a monthly basis and we can see that payment going into an account. And also at the end of the year, we've got a notice of assessment to show what the taxable income of the individuals are, even though they're directors of the company. What the banks will do, they will actually not... they don't want to see the profit loss of a company.

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They just are happy to see the notice of assessments and then assess the debt on that if it's affordable. So this particular company, it had a couple of a loss in one year but was still paying out income to the client and we were able to use notes of assessment to get the deal over the line again in a real niche little space...

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...and one lot that everyone knows. But yeah, a good result nonetheless. So that's that's why that was my second scenario. But anyway, cool! You were saying about Lydian HQ, yeah? What's happening?

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[Jackie] Yeah, what's the latest?

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[Chris] So this, I mean this year we could have... so we've got this national partnership with H&R Block, which is really cool and the slowly building, you know, the trust and the I suppose that, you know, getting referrals of their clients through the system right now. So that means now we're looking to recruit more brokers across the country to plug into these geographical districts, which H&R Block's got.

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So, you know, looking for a Newcastle broker. If we if anyone's out there, we need a Perth broker as well to support the business, also a Melbourne broker as well. And look, if you're in Northern Territory and you want to join Lydian, certainly there's a spot for a Lydian broker as well. So anyway, we're looking to increase the broker team to complement the national partnerships that we've got, which is really good.

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And then the other thing we're looking to do is also bolster up our operations team as well. So, you know, we're going out to partners and clients and we want to commit to good service levels. We want to have trained and educated back office staff as well to complement the excellent work our brokers are doing. So that's a little mini plan for the next sort of few months as well.

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So, yeah, watch, watch this space. But you know, plenty, plenty of goals being kicked. Andrew Rocksy's knocking on lots of doors as well. So if you're a partner current and he's, you know, asking to have a conversation with you, take it out, you know, to have a chat with him, he may even take you for a beer. But also he's he's definitely recruiting more partners as well for our broker team as well in that planning space.

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So now well-done Andrew, for kicking those goals as well.

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[Jackie] Amazing, we’re expanding and maybe next time we do a Boothy’s Bites we’ll be going worldwide; we’ll be recruiting from North America and Europe. (laughs)

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[Chris] I find it hard to manage myself just in Sydney, so I don't know. But if you speak to Andrew, we're going global. If you speak to me some days, you know, I think I can't believe what we've done in such a short space of time. But anyway, you just got to pinch yourself. Yeah.

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[Jackie] Yeah, definitely. You guys have... yeah, absolutely. Steered the ship for all of us. I thank you.

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[Chris] No worries! Just one quick question.

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When is your three year anniversary? You must be up for nearly an anniversary in Lydian, aren’t you?

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[Jackie] Yeah, I think it's around April, so it's coming up in a few months.

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[Chris] Yeah. So talking about founders of Lydian...

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[Jackie] Maybe it is February...oh sorry, what was that?

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[Chris] Talking about, you know, founding members of Lydian? I think you are definitely entrenched. Well, I don't think we had much of a business when you start, Jackie, so it only got better. So there you go. So again, you know, I'll have to check maybe next month. We're celebrating a three year anniversary for Just Jackie, which would be pretty cool too.

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[Jackie] Woo hoo! I can't wait. I expect something in the mail.

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[Chris] (laughs) Very good.

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[Jackie] All right, Boothy! Thank you so much for your time and can't wait to do this again next. Yeah.

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[Chris] See you March. Ciao!