How the RBA rate cut impacts our clients

The Reserve Bank's decision to cut the cash rate impacts all Australians, whether they're property owners, hopeful buyers, investors, sellers or simply have a savings account. The impacts of a change in interest rates is an important time for us to review our client's current position and financial goals. It can present opportunities to save, a need to change strategy or even provide new avenues to reach financial goals.

Following the rate cut, it's an important time for mortgage holders to review their loan to make sure it's still the best option for their current situation and also aligns with their future goals. With lenders able to borrow money more cheaply, they can lend money out at a cheaper rate. This means clients may be able to borrow more or save on their home loan.

Most lenders are passing on the rate cut so homeowners with variable loans should expect a saving. If not, it only makes shopping around now even more pressing. Lenders are competing avidly for business with some even passing on a greater drop in variable interest rates than the RBA cut of .25%.

The rate cut has also prompted more competition amongst fixed rate options. So, depending on a homeowner's circumstances and plans for the next three to five years, now may be a good time to consider locking in a low fixed rate to secure loan repayment consistency.

With an opportunity to save money on their loan, homeowners should consider where to allocate these savings. With most lenders passing on the rate cut, variable home loan rate holders with a $300,000 loan could save $47 a month. Whilst these savings can seem small, over the life of a home loan it can make a significant difference if they maintain the same higher repayment. This will save on interest and help pay off their home loan faster.

In the property market, we can expect investors to continue to enjoy cheaper lending and depreciation advantages in the blue-chip market. This will increase competition for buyers and having a very clear understanding of their lending options, true maximum borrowing capacity and pre-approved finance will be essential to remain competitive.

For first home buyers, reviewing less traditional lending options may be a necessary move. If you have clients interested in purchasing their first property, but it feels out of reach, encourage them to get in touch. I can review their situation for other options such a guarantor home loan where a family member (usually a parent) can provide security for them using the equity they've accumulated in their own property.