With the Reserve Bank of Australia (RBA) cutting interest rates, now is a good time to reassess your finances and ensure you are making the most of the first interest rate cut since April 2009.
According to Kevin Young, CEO of The Investors Club, the following strategies will help to maximise the financial gains from a rate drop: (More From Yahoo!7 Finance: Most Ridiculous Excuses For Calling In Sick)
Use the extra cash wisely
The 0.25% rate cut means a $600 saving per year in payments for the average Australian mortgage holder with a $300,000 loan.
That extra money can be used to pay off a home loan faster, or smash down unwanted credit card debt. (More From Yahoo!7 Finance: The World's Wealthiest People By Country)
Don't fix your rates yet
With banks and credit unions offering fixed rates home loans as low as 5.99% for 3 years the banks must predict further rate falls.
"The big banks are predicting a record $24 billion profit for next financial year. They don't make these profits by offering investors a fixed rate that they lose money on," commented Mr Young. (More From Yahoo!7 Finance: For Sale: Australia's Most Expensive Properties)
Time to consider your next property purchase
When rates drop consumer confidence bounces back. For the past 6 months the property market has been in a slump, which has given buyers the upper hand in negotiations.
"This makes it a great time to buy before people start to really clamour back into the market," says Mr Young.
Interestingly, Westpac reported a spike in new property approvals in its latest report and many experts are tipping the RBA to continue to drop rates over the coming year. (More From Yahoo!7 Finance: Inside The World's First Billion-Dollar Home)
Time to start investing
Some investors had set up their budgets so that they were getting by with mortgage interest rates of 7-8%. If rates continue to drop those people will begin to see they have extra money to play with.
"Having less to pay on holding costs puts investors in a great position to pay off other debts to consolidate their position before making their next investment." concludes Kevin. (More From Yahoo!7 Finance: Highest Paying Jobs in Australia)
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10 Comments
Maybe the banks etc will borrow more locally now.
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ReplyAbsolutely no tips here how to make money, what a waste of a article.
Replyits amazing that we can have the highest private debt in the world, and the RBA now thinks we need to borrow more...
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