RBA Cuts Interest Rates To a Record Low of just 0.5%

RBA had their 1st Tuesday of the month meeting yesterday. It was decided to drop the cash rate from 0.75 to 0.5%. This is a new historical low. Strangely enough, most banks have passed on the cut to customers with interest rates dropping to under 3% on a “Best Rate” with many banks. This makes owning property very cheap at present. If investors are picking the right property with a decent yield, that property should be cash flow positive in most cases. If you have property, it is a great time as most properties will actually be putting cash in your pocket at the end of the month and in turn helping investors pay off their own home faster. While it is a great time to get started in property investment, caution should be maintained. I would be extremely careful about investing in either Sydney or Melbourne. I think these markets are overpriced with the Income to Home Payments ratio is way out. I think the drop in interest rates could stimulate those markets further and in turn put them at risk of a bubble. I would much prefer to be investing my money into the Brisbane market. The Brisbane market is ripe for an upcoming boom and the drop in rates may just be the thing that kicks it off. Brisbane is definitely the market to watch at the moment. It has a very strong demand and it is under supplied. This reflects in the extremely low vacancy rates and the high yields.

The RBA has blamed the corona virus for the drop in rates claiming that it will slow down the global economy. There is no doubt that the virus is having a negative impact on some parts of the economy. Tourism for instance is getting knocked around badly with the lack of people movement. However, I don’t think the corona virus is going to be the long term game changer a lot of people think it will be. It will likely blow over in a few months then we may see interest rate increase again.

So while rates are down, use them with your increased Borrowing Capacity.