As you may know, on October 1st The Reserve Bank of Australia cut interest rates to 0.7% (down 25 basis points). I wanted to jump on here to talk about what this means for you, the investor.
The rate cut today was widely expected and is a historic low. There is bipartisan support for the big four banks to pass the cuts on to you, the customer.
There is also strong reason to believe there may be further cuts ahead. This is an extract from the RBA statement:
“It is reasonable to expect that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments…and is prepared to ease monetary policy further if needed.”
Why did the RBA cut interest rates?
The goal is to “support employment and income growth and to provide greater confidence that inflation will be consistent with the medium-term target.”
What do interest rate cuts mean for you?
A consequence of the rate cuts is an explosive rebound in house prices. According to Commonwealth Bank economist Gareth Aird, RBA’s rate cut today adds “fuel to the fire” with prices in Melbourne and Sydney having shot upwards about 3.5 per cent in the last quarter.
While the cut is bad news for those with money in the bank (virtually no returns on big bank savings accounts), it’s great news for investors and those looking to invest.
“Buyers still have some time to take advantage of improved housing affordability before values return to record highs,” CoreLogic Head of Research Tim Lawless said.
You can read the official report from the RBA here.
To learn how you can take advantage of these interest rate cuts, you can give me a call or request a call from one of our property finance experts.