There is good news for Property investors following the Reserve Bank of Australia’s (RBA) decision to drop the official cash rate by 25bts to 3.25% and it is hoped the banks will pass on the full rate cut to home owners.
Author: Don Crellin, General Manager, Resolve Finance
There is good news for Property investors following the Reserve Bank of Australia’s (RBA) decision to drop the official cash rate by 25bts to 3.25% with markets strongly indicating there will be another reduction before the end of the year.
The decrease has been influenced by a softening in the outlook for growth in the world economy and the RBA Board’s decision to be a little more accommodative.
RBA Governor Glenn Stevens said ‘the board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target.’
He said interest rates for borrowers had been below their medium term averages for a little while with some impact now showing up in the wider economy.
The lower interest rates are reported to be influencing a recent improvement in property values which have risen for the fourth consecutive month. According to RP Data, capital dwellings rose by 1.4 percent during the month, the largest month-on-month rise since 2010 and Perth property values jumped 1.6 percent for the month.
Don Crellin, General Manager Resolve Finance, believes the lower interest rates may generate renewed activity from investors to enter the market.
‘Lower interest rates is great news for prospective and current home owners as it aids affordability and reduces repayments,’ said Mr Crellin.
‘Yesterday’s announcement is good news and it is hoped the banks will pass on the full rate cut to home owners,’ Mr Crellin continued.
If the banks pass on the full reduction, it will result in the following possible decrease in repayments for investors:
Over the past eleven board meetings the RBA has cut rates by a combined 150 basis points which means someone with a $300,000 mortgage is about $240 a month better off.
While investors wait to see if the banks pass on the full interest rate cut, speculation is once again mounting as to whether the RBA will again drop the official cash rate at the next meeting scheduled for Melbourne Cup Day – which way will you be betting?
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DISCLAIMER:This information is of a general nature only and does not constitute professional advice. We strongly recommend that you seek your own professional advice in relation to your particular circumstances.