- October 2, 2019
- Posted by: Rogers Property Group
The RBA has dropped the cash rate again for the third time his year. The cash rate now sits a historic low of 0.75%.
This is great news for property investors and those looking to get started in property investing. While not all banks have passed on the rate cut yet, a few have and no doubt more will follow. If you have the ability (borrowing capacity) to get into the property market, then the competition from lenders for your business is very strong with some great offerings out there. Once more banks pass on the rate cut it will mean it is even cheaper to hold property than it already is now. Some rates with some smaller lenders are already in the 2% range.
With the lowering of rate and an easing of credit policy, property markets nationwide are showing very positive signs. If there is a further rate cut this year, that could be the catalyst for a serious rise in the property markets across the country.
Why another cut?
Although the global economy is in quite good shape the worry for the RBA is that consumer spending is down. People are spending less of their disposable income and saving more. (which to me seems like a good thing!) Although without that consumer spending the economy can struggle. This is in some part caused by slow wages growth and some part due to consumer confidence and access to credit. Levels of employment are high and work participation is also high but what the RBA wants is higher employment to insulate the country against any downturn and with lower unemployment this will forces wages up.
The Board took the decision to lower interest rates again today to support employment and income growth and to provide greater confidence that inflation targets will be met. The economy still has excess capacity and lower interest rates will help use that up. The Board also took account of the forces leading to the trend to lower interest rates globally and the effects this trend is having on the Australian economy and inflation outcomes. The Australia dollar is also very low.
It is likely that an extended period of low interest rates will be required in Australia to reach full employment and achieve the inflation target. The Board will continue to monitor developments, including in the labour market, and is prepared to ease monetary policy further if needed to support sustainable growth in the economy, full employment and the achievement of the inflation target over time.
So as property investors it is a good time to not only expand our portfolios if we have capacity but to also check what rate we are paying.