Economic Wrap The Reserve Bank of Australia (RBA) affirmed industry predictions by cutting the official cash rate to 2.5 per cent at its August board meeting. The 25 basis point rate cut takes the cash rate to its lowest point ever. Speaking about the decision, RBA governor Glenn Stevens said, “The board has previously noted that the inflation outlook could provide some scope to ease policy further, should that be required to support demand. “The pace of borrowing has remained relatively subdued, though recently there are signs of increased demand for finance by households,” he said. The decision by the RBA to cut interest rates to 2.5 per cent will be welcomed by families, investors and first-time buyers. Within hours of the RBA’s decision, a number of the major and non-major banks had passed on the full rate cut, which can only mean good things for borrowers. ING DIRECT’s latest Financial Wellbeing Index has found that borrowers are becoming more comfortable with repaying their mortgages, with 43 per cent of mortgage holders now ahead on their repayments. What does this mean specifically for investors? Your existing properties will now be cash flow neutral, if not positive after tax deductions have been applied. With interest rates at their most competitive, strategically, you are in no better position to be considering adding to your portfolio. Although, in general (there are many sub property markets in Australia!) the market has been flat or slow, Property Investment is a long term strategy, and research shows that over 15 year plus periods property performs strongly and consistently. The key to success and financial freedom is duplication (within your means of course). If you have the excess cash flow and capability to increase your asset base - why wait until property prices and interest rates increase? We have been experiencing some of our busiest months on record and this comes as a surprise to some with all the doom and gloom reported in the media; however it completely makes sense. With the ability to take advantage of current financing structures and fixed rates, I guarantee if you commit to your strategy and to maintaining a business mindset; you will not regret it in the years to come. Contact Us to request a call or to make an obligation free appointment with Jo.
Posted on: Sun, 01 Sep 2013 23:11:11 +0000
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