Interest rates get cut

After nearly 30 meetings and an unprecedented fix on rates, this week the RBA cut their cash rate to a historic low of 1.25%. It is the first time rates have been cut in 3 years. This is wonderful news for investors and means it is even easier to hold investment property. Tuesday’s cut should free up an extra $60 a month for a typical mortgage holder. Another one will free up a total of $120 per month. The drop in rates means that more properties will move to being cash positive for investors. The RBA cited low inflation and wage growth as part of the reason to lower rates. Unemployment at the moment remains still low but the RBA would like to see that come down further as well. RBA would really like people to start spending more, pushing prices up and in turn raising inflation.

Although the RBA dropped rates, in typical banking fashion, not all the rate reduction was passed on to customers by some banks. Both CBA and NAB have been customer focused and have been very good in passing on the full rate cut whereas greedy Westpac and ANZ are putting their own profits first and not passing that rate onto customers. This lead the Treasurer Josh Freydenberg to publicly take a stab at ANZ for not passing on the cut as it should have. Other banks will shortly follow suit and start to pass on the rate cut to customers.

With rates dropping and expected to drop even further, this could be a perfect environment for many investors to expand their portfolios ensuring that they select the right market to be investing in.