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What the Surprise RBA Cuts Mean for You!

Reserve Bank of Australia

What the Surprise RBA Cuts Mean for You!

In recent news the Reserve Bank of Australia announced a 0.25% cut in interest rates taking them to a record low of 2.25% p.a. The decision was one expert’s were predicting, though the majority had presumed it would occur much later in the year.

“The cut is expected to add further support to demand, to foster sustainable growth and inflation outcomes consistent with the target” – RBA Governor, Glenn Stevens

The RBA backing their decision, citing modest income growth and the movement of the Australian dollar as the main reasons behind the interest rate cut. This is likely to be combined with further reduction in rates later in 2015, in an effort by the RBA to improve employment figures and continue the economic reset of the post-resources boom.

So what does this Change Mean for me?

The Reserve Bank’s decision to cut rates is important as they aim to strike a balance between economic growth and growth that could risk overstimulating the property market.

Since the rates have begun their downward trend in November 2011, Australia’s capital cities dwelling values have seen a dramatic increase of 19.6%.

With the latest cut likely to cause the standard variable mortgage rate fall to 5.7% and discounted variable rates to 4.85% potentially leading to the cheapest home loans in over 40years.

These low mortgage rates have the potential to add more fuel to what is already a strong marketplace.

Is this Change Permanent?

Well according to experts we are expected to receive further cuts to the already low interest rates to a projected low of 2.00% sometime during 2015.

But, it doesn’t end there as there’s a strong chance that we’ll see the Reserve Bank then lift the cash rate as soon as in the next 18months according to experts, should they see adequate improvement in economic growth.

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Alisa Muhieddine

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