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Prospects and Pitfalls for 2024
And How Caveat Loans Can Help

2024 is shaping up to be a mix of financial opportunities and challenges for the average Australian

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2024 is shaping up to be a mix of financial opportunities and challenges for the average Australian, hard on the heels of a shaky 2023. However, several factors considerably impact the typical household’s income, expenses, savings, and investments. And just like one writes resolutions at the start of every year, let us analyse the changing economic landscape to prepare for any eventuality.

The Post-Pandemic Landscape

One of the main opportunities for Australians in 2024 is the recovery of the global economy from the COVID-19 pandemic, which has boosted the widespread vaccination and reopening of borders. 

As announced by the International Monetary Fund (IMF) in October 2023, global growth is projected to slow to 3% in the remaining months of the year and by 2.9% in 2024 amid widening divergence. More robust growth is expected in the US and large emerging markets, while China and Europe will still see a downward trend.

The widening divergence among countries mentioned in the IMF report is caused by the softening demand for services, the shock felt by some countries shifting to alternative energies and the economic tightening measures enacted by some countries clashing with others.

Despite this, the IMF still projected that inflation will recede from 6.8% to 5.7% in 2024, giving the world economy the much-needed breathing space for recovery and gradually lessening fears of widespread recession among the world’s leading economies.

RBA’s Response and Effect

In November 2023, the Reserve Bank of Australia increased the interest rate to 4.35%, resulting in higher borrowing costs to further control the persistent inflation in Australia. The RBA will also continue closely monitoring the global economy, trends in domestic demand, and the outlook for inflation and the labour market in 2024.

The effect of the increased rates on small and medium-sized enterprises, as well as average Australians, is expected to include:

  • Cash flow issues
  • Delays in collection for trade receivables
  • Higher interest and service charges
  • Inability to refinance or renegotiate banking requirements
  • Difficulty in collection of loans
  • Trading losses and short-term capital deficiencies
  • Creditors recovering debts.

Stock Market Volatility

Another risk for Australians in 2024 is the uncertainty and volatility of the stock market, which has been affected by geopolitical tensions, trade disputes, environmental issues and technological disruptions. The Australian share market has performed well in 2021, reaching a record high of over 7,600 points in August, driven by solid earnings growth and optimism about the economic recovery. However, there are also signs of overvaluation and speculation in some sectors, such as technology, healthcare and consumer discretionary, which have high price-to-earnings ratios and low dividend yields. These sectors may be vulnerable to a correction or a crash if there is a change in market sentiment or expectations. For example, in February 2020, the Australian share market plunged by more than 30% in less than a month due to the outbreak of COVID-19.

Diversification Is Key

Therefore, it is essential for Australians in 2024 to have a diversified portfolio that can withstand different market scenarios and provide consistent returns over time. A diversified portfolio is a collection of different asset types with other risk-return profiles and correlations. Risk-return profile refers to how much return an asset can generate for a given level of risk. Correlation refers to how much two assets move together or opposite. A diversified portfolio should include a mix of shares, bonds, property, cash and alternative investments (such as gold, commodities or cryptocurrencies). Having a diversified portfolio can reduce the risk of losing money when one or more assets perform poorly or unexpectedly. For example, if shares fall due to a market crash, bonds may rise due to lower interest rates or increased demand for safe assets. Similarly, if property prices decline due to oversupply or lower demand, alternative investments may increase due to higher inflation or geopolitical instability.

A diversified portfolio should always be tailored to suit personal goals, time horizon and risk tolerance. Objectives refer to what one wants to achieve with money, such as saving for retirement, buying a house or funding education. Time horizon refers to how long one plans to invest their money, whether short-term, medium-term or long-term. Risk tolerance refers to how much risk one is willing to take with money, such as conservative, moderate or aggressive. For example, a young investor saving for retirement may have a higher allocation to shares and alternative investments than an older investor living off their savings. This situation exists because the young investor has a longer time horizon and can afford to take more risk for higher returns. On the other hand, the older investor has a shorter time horizon and needs to preserve their capital and generate stable income.

Resolution 2024: Improve Financial Outlook

Although 2024 appears to have a lot of pitfalls, there will still be a lot of prospects for those willing to take risks and act fast to improve their financial outlook. The challenge is that one must have access to quick funding to pounce on opportunities – situations that caveat loans were perfectly designed to address.

A caveat loan is a type of secured loan that allows the borrower to access funds quickly by using their property as collateral, allowing the borrower to take advantage of time-sensitive opportunities, such as buying a property at a discounted price or securing a lucrative contract. The fastest option to funding in the market today, a caveat loan, does not require the consent of the existing mortgage lender and can be settled within a few days of application. A caveat loan can be used for various purposes, such as paying off urgent debts, buying more stock, completing renovations or bridging the gap between property sales and purchases. 

However, caveat loans also have some drawbacks that must be considered carefully. A caveat loan usually has a higher interest rate than a regular mortgage loan and may have additional charges. A caveat loan also has a short repayment term, usually between 1 and 12 months, which means that the borrower must have a clear exit strategy to repay the loan on time. A caveat loan also prevents the borrower from conducting any transactions involving their property without the permission of the caveat loan provider. Therefore, a caveat loan should only be used as a last resort when other sources of finance are not available or suitable.

In conclusion, 2024 will be a year of opportunities and risks for the average Australian regarding their financial well-being. By being aware of prevalent factors and improving financial literacy, one can make informed decisions to enhance financial security and prosperity in the coming year. Utilising caveat loans can be one viable financial path if all the risks are understood.

In light of these facts, one must always weigh the pros and cons of caveat loans before embarking on this financing option. While caveat loans can be a potent tool for managing cash flow and seizing opportunities amidst rising interest rates and inflation, they also come with substantial responsibilities and risks that require careful consideration.

At Tiger Finance, we always guide you every step of the way with loan experts well-versed in the current situation in the world of financing. You can avail of a free consultation with our in-house financing expert without obligation to give you the most accurate picture of your loan situation today.

Contact Tiger Finance today so that we can help you begin your journey to secure the exact hassle-free loan product that you need.

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