Cash Rate Drops To All New Lows…..

Isn’t it amazing how a medically-related situation can have a dramatic impact on financial markets worldwide yet be totally unrelated to finance? Right now, the world is focused on the current pandemic created by the novel coronavirus which has brought many sectors of the manufacturing world, hospitality and tourism to a complete halt (well almost). Don’t go here…don’t go there…revise your travel plans…cancel your flights and so on!    So how is this persistent virus dilemma impacting on property markets and finance, more specifically, on borrowing money?

One area most recently impacted has been our official Cash Rate
In response to a sluggish economy and looming concerns over the ongoing impact of the coronavirus on business in general, this month the Reserve Bank dropped the official cash rate to an incredibly low 0.50%! For Australians, this is something many of us never thought possible.
 
So, as a result, many financial analysts and property experts believe there is likely to be a ‘domino effect’……..

  • For many self-funded retirees - it means they may have to go out and find another source of income (or a job) so they can continue to put food on the table as the amount of interest received from fixed-term deposits to fund their lifestyle becomes reduced 
  • For product importers and resellers – supply of imported goods is being hindered due to many factories in China closing in response to the virus pandemic. When they slowly start to resume operations, it will take some time for supplies to get back to normal
  • For home buyers – the major lenders have already announced they will be passing on most or the full 25 point reduction across their home loan lending range, so borrowing money has never been more affordable, with more and more competitive loan products offered…..the danger here is that lower borrowing costs can create an unrealistic increase in property values thus causing many people to pay an inflated amount over what a property’s real value is,  based on recent or actual market trends. 
  • On the plus side, it’s a great opportunity for existing borrowers to review their current home loans to potentially refinance to a cheaper loan and save a significant amount on interest payable.  


The final impact on this month’s rate reduction won’t be seen or known for some months and as there are so many variables, it is almost impossible to predict if we will eventually see a zero cash rate….at which point that means the country is in negative and the banks will be paying us to borrow money!


So in the interim, for current home borrowers, there are real savings to be made…please feel free to call me on 0438 041 111 to arrange a confidential discussion about your current home loan to see how we may be able to help save you some money, and maybe even get some cash back if the numbers are right!.

As always, enjoy life, work hard, play safe and remember that we are always here to help you
 
‘Take the Confusion Out of Lending’ 

All the Best

Peter Vinci - 0438 041 111