Anita Bell

Anita Bell is one of my favourite people. Her books "Your Mortgage and how to pay it off in five years" and "Your Money: Starting Out and Starting Over" totally inspired me when I read them for the first time about 5 years ago. Of course, she paid of her home years ago when rates were different, property prices were different, and wages were different. But you can still apply the same basic principles to reduce your home loan!

And you don't have to BUY the books. You can save yourself some money and BORROW them from the library for free! Then take a few notes from the books, return them. You can reborrow them whenever you like. I often reborrow them just to refresh my memory and make sure we're on the right path.

Even just take her challenge - go to a Home Loan advanced repayment calculator, such as the one at Web Wombat. Plug in your loan amount, your interest rate and an estimate of the loan time. See what a difference it makes to YOUR home loan by just adding an additional payment of $10 a week to it. For example, on a $250,000 loan @ 5.64%, 25 year term and paying weekly. Paying an extra $10 a week will save you ONE YEAR AND FIVE MONTHS off the term of your loan and save you almost $14,400 in INTEREST. $10 is relatively easy to find each week by making a few small adjustments to your budget and spending patterns. Imagine if you could manage $50 a week, just by spending a little less on birthday presents, soft drink, alcohol or takeaway? That would save you 5 years and 8 months and almost $56,000 in interest. Is your jaw on the ground yet?

Compound interest is your friend, and it's totally worth a little effort NOW to save money and time in the FUTURE.

There was a fantastic summary in the Simple Savings June newsletter (which you can sign up for, for free - do it!) by Anita last year, which gave me some hope when interest rates were climbing and everyone was starting to panic. Interest rates peaked in August - and sure enough, she was right!

"Dear Simple Savings:I work in an education savings plan and have 10 years
of banking experience, including six years in business banking. I enjoy most of
what you put out. I am however concerned about the advice being given by Anita
Bell. In particular, her comments in the second situation of a person looking at
buying a house in 12-18 months... I am concerned at Anita's economic analysis
that states 'At the same time, we know that the pressure from ridiculous fuel
prices and increasing food prices/shortages will force a reduction in interest
rates (usually not long after an announcement about a rise in unemployment).'
Most commentators I hear and read are actually saying that the rising fuel and
food costs are contributing to inflation which the Reserve Bank spends its time
fighting against. These price rises actually increase pressure for interest
rates to increase, not decrease as Anita claims as a foregone
conclusion."

Hi Michael!
Thanks for your really good question. Of course you are right that rising fuel and food costs contribute to inflation and cause pressure for interest rates to increase AT FIRST - everyone hears this virtually every day in the media - but we are speculating for the next 12 to 18 months. The reason why I said interest rates are likely to fall is because of the current stage of the economic cycle, and what normally happens from here, which is something that commentators never seem to mention enough.
That is, the most usual Aussie economic cycle (averaged over the last 150 years, encompassing many peaks and falls, but simplified to its 16 bare bones), goes roughly like this:
Bond prices improve - check.. then usually...
Share prices improve - check, check... then usually...
Commodity prices rise - oh gosh, haven't they! (fuel is up 50% in some places!) check... then usually...
Overseas reserves topped up - check... then usually...
Money lending gets easier - double check... then usually...
Property values rise - check, check and oh my gosh check again!... then usually...
Low employment figures announced - check... then usually...
Bond prices back off - check ... then usually...
Share prices back off - oh my gosh yeah! Check (and not just because of the US housing market)... then usually...
Commodity prices drop - tick tock tick tock... we're all looking forward to that, aren't we! (especially on fuel and groceries)... and yes, I know fuel prices have special pressures on them because of world shortages, the whole China thing and so on, but that's even more reason for the next stage which is usually...
Overseas reserves drained - (half-check; still in draining)... soon usually followed by announcements about...
Money lending getting tighter - (in progress)... i.e. has anyone else noticed the rising number of mortgagee sales? Properties passed in at auction? And, the number of people who can't afford loans? (And please don't believe everything you read about house prices being the only cause! It's only half the story.)...
Real estate values fall - (in progress)... in many suburbs and cities this is currently appearing (on the surface) to be a plateau in prices, rather than a slump, but this 'plateau' effect has many reasons behind it, the length of loans and the time between purchase and resale being only two of the major contributing factors that act as 'equalisers', but for anyone who can work out the 'core' value of a property, negotiating lower prices shouldn't be a problem (and I'm talking tens and twenties of thousands here, not just a few grand)... then usually...
High unemployment figures are announced... (often advertised as a slump/minor recession)... which is already starting to be bad news for those who are already losing their jobs or finding new jobs hard to come by, but if high unemployment figures have an upside, it's this: that it usually puts enough pressure on governments and the reserve bank to trigger a down cycle in interest rates, which is part of the reason why the next trend on the list is:
Interest rates start to fall... soon followed by announcements that...
Bond prices have started to improve...
...and round and round the merry-go-round we go... ever cycling upwards of course due to inflation, or fluctuating a little along the way due to outside forces... and, of course there's always more than one thing happening at once, as the last few items on the 'list' show.
This is very simplified. I didn't include major international forces, and additional unforeseeable factors may drive our market a little higher still and ultimately deepen the slump that is coming (especially if it drags on to coincide with our natural slump from November to January, as happened at the beginning of this year)... but in relation to the question I was answering in regards to the couple with a sizeable deposit to invest, I stand by my original comments.
Also, please note that my response to the young couple clearly stated that we can expect interest rates to fall AFTER the next announcement of low unemployment figures.
Also, we all know that the economical cycle can grind to a halt or stagnate for a while at any stage. Sometimes the cycle moves swiftly, sometimes slowly, sometimes it stalls, and sometimes it rockets so fast it seems to skip a stage and cause a few things to happen at once (or so it seems from an outside perspective, when all you're listening to are the news headlines).
For people who learn more easily from pictures though - there's a light-hearted cartoon diagram in the last chapter of 'Your Money: Starting Out and Starting Over' called the 'bones of the economy cycle', which is designed so you can photocopy it for your fridge/tv so you can compare it to the reports you hear on the news over a week or month and start to get an idea and make your own informed predictions.
If you still have questions or doubts though, please read the last chapter of 'Your Money: Starting Out and Starting Over', not that I'm trying to convince you to buy it. It's already available to borrow free at virtually any school or public library.
Hope this helps other readers and clarifies any misunderstandings.