What does the Reserve Bank rate cut mean for you?

Earlier this month, the Reserve Bank of Australia slashed the official cash rate by 25 basis point to a record low of 2.25 per cent.

What does this mean for you? CHJ Financial finance expert, Eddie Harrison, has the answers.

Cheaper loans

By banks passing on the savings, money will be cheaper, meaning home buyers can lock in finance at a lower rate – leaving more money in your pocket.

Savings, of course, depend on the amount borrowed. Based on an average Gold Coast loan size of $500,000 and an interest rate of 4.69%, home owners paying both principal and interest repayments will save approximately $100 per month.

For many this might only amount to a night at the movies with popcorn, but if you have a large mortgage, or have been considering an investment property, the benefits are slightly more significant.

Buying an investment property

Lower interest rates essentially means there will be a smaller gap between the incoming rent and the outgoing mortgage repayments, making now a great time to secure an investment property – particularly before prices rise.

House price growth

The rate cut may also create a stronger demand for property over other assets, which could translate into prices growth, fuelling demand particularly in pockets within a close proximity to capital cities.

The next 12 months will be a great time to cash in on the growing equity in your home by selling or renovating your existing home.

Seek expert advice

Eddie’s news on the interest rate cut comes with a word of warning – always allow at least a 2 percent buffer in interest rates to ensure you can meet payments if there is a rate rise in ensuing years. And always ask an independent expert before taking out a new mortgage or refinancing an existing one.

If you would like to know more about your home or investment loan options, call CHJ Financial on 07 5599 5747.

Kind regards,
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