Historically Low Interest Rates Is Just the Beginning – But There’s More!

Nick Lockhart
Nick Lockhart
August 18, 2019
Property Finance
Historically Low Interest Rates Is Just the Beginning – But There’s More!

Great news for anyone with a mortgage!

Yes, the Reserve Bank of Australia (RBA) cut the cash rate this week, by 25 basis points to 1.25 per cent.

Last month I predicted a cut in interest rates, suggesting that unless the RBA put off their decision until after the federal election, rates would drop immediately.

The decision was deferred until after (and only because of) the election and this week rates hit a new record low.

The positive news around lending doesn’t stop with this week’s rate cut

There seems to be a mood of collective relief that the federal government was returned, and people can get on with their lives. For property investors, it’s business as usual.

Many feared that had Mr Shorten won on May 18 economic growth would have slowed quickly and hurt the overall health of the economy. The challenge with that is that sentiment acts like a self-fulfilling prophecy.

SMSFs dodged a bullet

One area that received virtually no pre-election scrutiny relates to your superannuation.

Labor were set to stop your ability to leverage the balance in your super (i.e. abolish limited recourse borrowing arrangements).

As a result of the election going the way it did you still have the opportunity to set up a self-managed superannuation fund(SMSF) and invest into real estate, rather than shares, with borrowed money.

Back to this week’s interest rate decision

The cash rate is the rate financial institutions pay on overnight funds and is how the RBA influences inflation.

The goal is for an inflation rate between 2% and 3% per annum.

Lowering rates promotes spending to stimulate economic activity. Conversely, interest rates are increased when the RBA considers there is too much spending in the economy, resulting in high inflation.

Australia, like much of the world, is living in a protracted time of very low inflation. This means that we are unlikely to see interest rates go up by any significant amount for a very long time.

‘Making Hay while the Sun Shines’

So, while the ‘powers that be’ set monetary policy in an attempt to keep the nation’s engine room headed in the right direction, your responsibility is to do what you can, with what you have, while you are able.

Right now, opportunities exist, and funding has never been less expensive.

The pendulum has started to swing and some of the tough lending rules that were introduced before, during and immediately after the banking royal commission are being relaxed.

This is all very good news for anyone keen to refinance existing loans or secure an approval for new lending.

Partnering with you

Speak with us today about all your lending needs and your investment goals going forward.

With all the changes going on in the background and our access to over 40 different lenders, there’s a pretty good chance we’ll secure you better outcomes and save you a lot of money.

If we can’t do that we’ll be ‘straight up’ and tell you.

Request your complimentary, no obligation, financial and investment check-up, at the end of the day, we are here to assist you.

Nick Lockhart

Nick Lockhart

MRD Property Expert
Nick is the Founder of MRD. Nick is in his element when he is inspiring, mentoring and teaching safe and responsible finance and investment strategies.

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