the mozo blog

Yet another RBA announcement looms. Apparently someone (God, Galileo or the Greenwich Mean Time Monster) has organised calendar dates in an effort to inflict as much pain on borrowers as possible – seriously, how can there be so many Tuesdays in every month?

In light of this startling revelation, we thought it would be a good chance to gauge the thoughts of the mortgage community who are, unfortunately enough, staring down the barrel of 18 months of gradual pain.

To make this amazingly easy for us, The Daily Telegraph have put together a short survey around Tuesday’s meeting, which can be completed at this very clickable green link. For those of you in the community who think the Reserve Board is out of touch, or would like to pen an imaginary message to RBA overlord Glenn Stevens, then you will find this a convenient, interwebs based soap box.

So despite the cash rate reaching 50 year lows, and staying that way almost long enough for even the most indecisive property owner to fix a pretty special rate, the Monetary powers that be are again falling back on their old tools. Now it appears people must brace themselves for a good, healthy dose of monthly electroshock therapy. Let’s just hope it ends better than it did for Jack Nicholson.

Need help with the pain? Compare Home Loans with Mozo to find a better a deal.

As the clock ticks and the dust settles around Citibank’s Tuesday bombshell with the announcement of its Online Saver account, Friday looms as a landmark day in the escalating ‘Savings Account Price War’. Earlier last month, UBank issued a press release announcing a ‘rate assurance’ on its flagship USaver product, declaring that if the USaver base rate is lower than that of any of its competitors’ base or introductory rates, UBank will raise the USaver rate to match it. The assurance only lasts till the end of the year and is limited to the following products:

• ING Direct Savings Maximiser
• Bankwest TeleNet Saver
• Commonwealth Bank NetBank Saver
• Westpac eSaver
• ANZ Online Saver

Every Friday, UBank reviews the competition and makes changes as they see fit. The question is: will UBank take the bait and add the Citibank Online Saver to its list? If it does, it will be forced to match Citibank’s introductory rate of 5.5%. If it doesn’t, would UBank’s customers feel it is shirking its promise to lead the field? With the fickle high-interest savings account market largely driven by interest rates, can UBank afford to concede defeat over Citibank’s introductory period?

If Ubank fails to match the Citibank rate we could well see a raft of increasingly technologically and fiscally savvy consumers opening a Citibank Online Saver account for six months to take advantage of the higher rate and then transferring it back across to their USaver when the promotional period ends. With the ease of online money transferring and account application, this could pose a real and direct threat to the USaver.

As the adage goes, ‘you can’t win a war on a peacetime budget’, and the longer UBank fails to acknowledge the threat posed by Citibank, the greater chance it has of losing what market advantage it currently has.

So will battle lines be drawn? Keep your eye on the fireworks right here, as we bring you UBank’s response from the front lines tomorrow.

Compare savings accounts at mozo.com.au

Citibank has lobbed a savings grenade into the battle for the best high-interest account. But has it missed its target (Ubank) to land somewhere behind the Big Four’s line?

The answer lies in the little asterisk that sits next to Citibank’s brand new interest rate, making me a little bit uneasy – like sitting next to unexploded ordnance. First, let’s check out the big print numbers:

UBank USaver = 5.46%
Citibank Online Saver = 5.50%
UBank USaver = maximum amount of money you can have before you are subject to lower interest is $1,000,000.
Citibank Online Saver = maximum amount of money you can have before you are subject to lower interest is $2,000,000.

Pretty convincing, huh? But before you take that spare $1,999,999.99 and plunk it into the Online Saver, let’s dig a little deeper.

While Citibank does have the higher interest rate, it’s only for the first 6 months after opening the account. And then USaver has the option of setting up an automatic savings plan which gives you an extra 0.10% (for balances of up to $150,000) if you put away a minimum of $100 per month. So if you’re prepared to commit a small amount more to your savings (and $100 a month isn’t such a hard ask), you’re looking at a variable rate to 5.56% with no other strings attached.

The only real benefit that the Citibank account has over the USaver is that you can have up to $2,000,000 in your account before the interest rate drops back to their standard variable rate of 4.25%. Whereas the USaver rate stays at a minimum of 5.46% for balances up to $1,000,000.

Compare savings accounts at mozo.com.au

War! That mad game the world so loves to play – Jonathan Swift

The assassination of Archduke Franz Ferdinand by Gavrilo Princip in 1914. Germany’s blitzkrieg through Poland in 1939. Coca-Cola’s launching of ‘New Coke’ in 1982. The “I’m a Mac” ad campaign launched by Apple in 2006. All sparks that lit the fuse of war, whether military, cola or computer driven.

Swift’s words have rung true once again, as Citibank today launches its new Online Saver account, and in doing so, sparking the powder keg that is the savings account market. The once stagnant savings account market has been rocked in recent months, with UBank’s high interest rate without terms or conditions setting a seemingly unassailable benchmark for the competition against the backdrop of steady Reserve Bank rate rises pushing savings rates higher and higher. Whilst Citibank’s rate is only promotional for 6 months, it does see the first savings account rate from any competitor to better what UBank’s USaver base rate has to offer.

Stay tuned as we bring you more updates from the front lines over the coming days as we run the rule over the new Citibank Online Saver and see what UBank’s response will be. Fingers crossed we don’t get caught in the crossfire.

Compare savings accounts with Mozo.com.au

You may have noticed there are more than the usual amount of Tom Selleck and David Boon lookalikes around town these days. This isn’t an 80′s flashback dream you’re having, it’s Movember, the time of year to celebrate the gift of upper lip facial hair. We here at Mozo think it’s about time we dropped the razor and kicked back for the month long “Mozotache Madness”. And to be honest, could we have asked to have a better name here at Mozo to support Movember?

So if anyone is feeling extra generous then perhaps you would like to make a donation to me and my team. We’re called “The Tom Selleck Fan Club” and you can donate via this link:

https://www.movember.com/au/donate/your-details/member_id/79844/

We’re all in it for the good of the cause, which is for prostate cancer and male depression. Plus, in the spirit of Mozo, the Movember people send you a nice little tax receipt for your tax deductions, helping you to save money off your tax bill at the end of the financial year!

Being totally independent and objective, Mozo doesn’t always have nice things to say about the ‘Big Four’ banks — especially because they often pawn off their better products to subsidiaries (Commonwealth to BankWest, NAB to UBank, to name a couple). So I decided last night to start digging around and find something competitive being pushed into the marketplace by one of these big players. A few fun-filled hours ensued as I trawled their respective websites, with unnecessary fees and uncompetitive rates as far as the eye could see. Swilling the dregs of my third coffee, I resigned myself to defeat and decided to humbly retreat to the comforts of Celebrity Masterchef. I’ll just have one last quick poke around, I said to myself, then go check how many cravats Matt Preston’s wearing.

And then I stumbled on the NAB Low Rate Visa Card — hold the celebrity cook-off!

First of all, the card has a very low rate on purchases: 10.99%, one of the best on the market. A relatively low annual fee of $49, and 55 days interest fees are other nice, if not inspiring benefits. The real thing that makes this card a winner is the promotional offer: 0% on purchases and balance transfers for the first 6 months.  With Christmas looming, this card could be a real winner for those hoping to spread the festive load over half a year without having to pay any extra interest.

Plus there’s a big saving on interest payments if you transfer a balance from another card — 0% for 6 months. The one stumbling block here is what happens after these 6 months. The purchase rate reverts to 10.99%, so that’s fine. However, balance transfers revert to the cash advance rate, which is set at a not so competitive rate of 19.99%. And in another sneaky twist, you’ll have to pay off that low-interest purchases debt before you can put a dent in the higher-interest balance transfer.

This card will save you a bunch — but ONLY if you can pay everything off in 6 months.

So NAB has proved the Big 4 can actually put out a quality product that’s economical to boot. If you can pay off that balance transfer in time, this could be the card that will feather your present nest without breaking the bank. Just make sure they’re not all cravats.

Compare credit cards with mozo.com.au

Last month Jetstar rather unexpectedly unveiled its new line of credit card, the Jetstar Mastercard. We’ve seen this before when Virgin – amid a blitz of fanfare and publicity – launched their card back in 2003. Jetstar, as we all know, run their airline on the low-cost carrier model and as such, they’ve decided to try to extend this image of affordability and price-competitiveness to their credit cards. An interest rate of 10.99% on purchases certainly does that, placing it solidly among similar cards, while the offer of 0% on balance transfers for 6 months is an attractive option for those looking to switch over — the bonus being that it reverts back to the low purchase rate rather than the significantly higher 19.99% cash advance rate of most other credit cards. The annual fee of $49 is at the lower-end too.

But here’s the thing: as far as placing itself in the ‘low rate credit card’ market goes, this card really is nothing spectacular in terms of pricing. There are cards out there with better combinations of rates and fees, such as the BankWest Lite Mastercard or even the NAB Low Rate Visa. The only real point of difference, and what we assume Jetstar is hoping will sell this product, is the ‘Jetstar Dollars’ rewards program. The addition of this program makes the Jetstar card the lowest rate credit card that offers rewards.

It makes a snappy little media soundbite, but are these rewards any good? Well, here’s how it works. You accrue ‘Jetstar dollars’ at a rate of 1 cent for every real dollar spent. As soon as you accrue $100 dollars they automatically send you a travel voucher to be used on any Jetstar flight (or if you prefer, you can request it early in increments of $25). From here on in, unlike any other flight rewards program, Jetstar really do put a gun to your head. You have to book using that voucher within 3 months, and travel within 6. You can’t accrue enough dollars to buy a flight to Hawaii or Bangkok or any other exotic destination; you’re effectively limited to $100 off your trip — or a summer holiday in Adelaide. Just what you always wanted.

They go on to boast in their press release that you can save up to $500 dollars annually on Jetstar fights. But for this to happen, you have to spend $50,000 on your card (anything over this doesn’t earn Jetstar dollars), in which case you’ll get 5 separate vouchers to be used up within those narrow timeframes. Perhaps when Qantas points become an option (mooted for mid-2010 release), we’ll take a bit more interest.

So all up, look, maybe we’re being a bit harsh on the Jetstar card. As a package it’s relatively competitive. However, when you’re making the leap from airline to credit card, they should’ve taken a leaf out of the Virgin book. When Virgin launched their credit card, it was revolutionary for the time -  no annual fee, instant rewards, a very low rate and small things like colour choices and real people on the phone. Sorry to clip your wings Jetstar, but your card is nothing special.

Compare credit cards with Mozo.com.au

Part of ANZ’s new “making banking simpler” push is their ANZ Money Manager service.  It sounds fantastic – it aggregates all your bank balances and transactions in one spot online, even if they aren’t ANZ products, so you can see the complete picture of your money.  (ANZ say it is a first for Australia, but there were aggregator services like this as many as 10 years ago.  And they never took off.)  The thing that caught my eye about ANZ’s offering was that it can automatically categorise your transactions so you can see what you spend your money on, and you can feed that info straight into their online budgeting tool.

But when I went to try it out, I stopped dead at the point where it asks you to divulge the userid and password of your other online banking accounts.  ANZ say it’s safe, but I just couldn’t bring myself to do it.  If something goes wrong, ANZ will no doubt point to the fine print of their terms and conditions, where they warn that getting information through their service “is done at your own discretion and risk”.  And my other bank isn’t going to come to the rescue, because their conditions are that you don’t disclose your info to anyone – not even to a password-protected service run by ANZ.

What do you think?  Would you hand over your internet banking passwords to ANZ Money Manager?

Compare bank accounts with mozo.com.au

Yes, you heard me. Unfortunately for all you people out there with big huge ones, the truth is finally out. The smaller they are, the better. Mortgages that is; and there are no pills or herbs that can help you. On the upside, you can still benefit from a competitive interest rate and a well-structured repayment plan.

So how do you make your enlarged debt shrink sooner? First of all, jump into a cold shower, refresh yourself, and then log on to a comparison site like this one and do the research. There’s almost always a better interest rate to be found and it’s probably not going to be with one of the major banks.

Secondly, once you’ve found your desired financial partner, you’ll have the option of making weekly, fortnightly or monthly payments. Now here comes the maths…

Let’s take a mortgage of $300,000 to be paid off over 25 years at an interest rate of 6.00%. We can break it down into three repayment methods: monthly, fortnightly and weekly. (Those with high debt and low attention spans can skip straight to the results.)

Monthly:

Total Interest: $279,871.26
Payment: $1,932.90
Time (months): 300

There are fewer actual payments to be made, so the bank has to ask for higher repayments to cover the cost of the loan over the 25-year period.

Fortnightly:

Total Interest: $279,535.51
Payment: $891.59
Time (fortnights): 650

Now we’re looking slightly better on the interest payments front; however, those extra payments you’re making haven’t had much effect, because the bank averages your payments out over the 25-year period. You’re paying slightly less every fortnight but it’s made up by the fact that there are more actual repayment dates.

Weekly:

Total Interest: $279,391.57
Payment: $445.69
Frequency (fortnights): 1300

OK then, basically you’ll only save a total of $479.69 in interest payments over the life of your 25-year loan by choosing the weekly option. Big deal.

So here’s the secret: pay your mortgage using a bi-weekly method. The bank’s fortnightly method is still 26 payments a year like the bi-weekly, but it’s at a reduced rate so they keep you as a customer for the full 25 years. What you SHOULD be paying every fortnight is simply half of the monthly payment (otherwise known as bi-weekly), which in this case is $1932.90 divided by 2, or $966.45.

At $74.86 more than the fortnightly payment, the bi-weekly makes a big difference:

Bi-Weekly

Total Interest: $228,991.19
Payment: $966.45
Frequency (bi-weekly): 650

In effect, using the bi-weekly method, you’re making one extra repayment a year and you save $50,880.07 in interest payments over the life of the loan.

For all of you who’ve made it to the end of the article, you’ll shave 5 years off the life of your loan, bringing it to 20 years! Not a bad result for 2 minutes of reading.

Compare home loans with mozo.com.au

UBank’s USaver, already quite the consumer champion, raised its rate by 0.35% today (effective next Tuesday), lifting it once again head and shoulders above the competition. Having sat out the last Reserve Bank rate rise, eyes were firmly aimed at the NAB-backed upstart to see whether it had perhaps conceded in its revolutionary push towards top spot in the savings account market. Alas for ING Direct and co., UBank had no such ideas, and have once again set themselves at the head of the pack.

Also of great news to existing account holders, was UBank’s rate assurance last night, declaring that until the end of the year at least, that USaver interest rate will not fall below that of their chief rivals (including introductory promotional rates), directly labelling accounts by ANZ, BankWest, Westpac, ING Direct and Commonwealth Bank as their chief competition (though surprisingly no Raboplus…).

So the time’s never been better to snap up a USaver account, once again a good 0.2% or more above its rivals. Get in quick while the rate assurances are hot I say!

Want to make up your own mind? Compare Savings Accounts on Mozo.com.au