RBA dropped 25 basis points
- Thread starter james_w
- Start date
A dodgy share market and cheap money can only mean 1 thing for RE in my opinion - and its mostly all upside. 
rba dropped another 25 basis points wonder if the bank will pass it al on this time..
my repayments looking good if that happens time to go shopping
Of course, they'll pass on the full 25. If fact I'm hoping for 30.
Yay!!! Time to go shopping. Again
That was quick.
And more cash rate cuts to come according to CJ:
http://www.propertyobserver.com.au/...mpaign=9881328cd6-June_5_RBA&utm_medium=email
http://www.propertyobserver.com.au/...mpaign=9881328cd6-June_5_RBA&utm_medium=email
CJ has changed his tune 180 degrees
This may seem like a stupid question, but go easy on me....
In this article CJ states that interest rates could go below 1.9%. However if the banks are already complaining about high funding costs then they shouldn't be able to reduce rates much lower than current? So what is the point?
However, if all other markets have significantly lower interest rates than us (with some countries at or close to 0%), how is it that our banks cannot access funds at rates that allow them to pass on RBA cuts in full
I agree with Propertunity on this one. The exact market dynamics of cheap rates coupled with an (understandably) high volume of 'fear' in the market will see many who were contemplating real estate investment discard it quickly.
However, for the astute among the investment community, opportunity will run rampant over the next couple of years. I guess what I'm saying is this; the old adage of 'the greater your risk profile, the greater chance you can increase your returns' applies here.
In my mind, because of all the due diligence and hard work I pour into my portfolio, I'm not afraid of these storms and can weather them quite well. So, cheaper interest rates and increasing rents, whilst bad for the macro economy, is actually great for the economy of Cam (me!).
However, for the astute among the investment community, opportunity will run rampant over the next couple of years. I guess what I'm saying is this; the old adage of 'the greater your risk profile, the greater chance you can increase your returns' applies here.
In my mind, because of all the due diligence and hard work I pour into my portfolio, I'm not afraid of these storms and can weather them quite well. So, cheaper interest rates and increasing rents, whilst bad for the macro economy, is actually great for the economy of Cam (me!).
Last edited by a moderator:
There is a very big difference between complaining about high funding costs and high funding costs.
Have you ever seen their funding costs ??
Have you ever seen a journalist ask one of the Big 4 CEO's to actually see their funding costs ??
When they mention "funding costs", everyone swallows whatever they say hook line and sinker and simply moves onto the next question.
Your next question gets to the nub of the issue. It doesn't make sense, and hence what you are being told upfront isn't the real position.
It's called big boys smoke and mirrors.
CJ said when RBA dropped official bank rate to 2.5% in April 2009, mortgage loan rate at that time was 5.1%.
I wonder what was the 3 year fixed rate home loan in April 2009?
Thanks
Last edited by a moderator:
This may seem like a stupid question, but go easy on me....
In this article CJ states that interest rates could go below 1.9%. However if the banks are already complaining about high funding costs then they shouldn't be able to reduce rates much lower than current? So what is the point?
However, if all other markets have significantly lower interest rates than us (with some countries at or close to 0%), how is it that our banks cannot access funds at rates that allow them to pass on RBA cuts in full
Well they get to pay depositors less interest and cut borrowing rates by a lesser amount so can increase their margin. On the other hand those banks that use overseas funds that form part of their mix, if the borrowing costs are too high then they can reduce lending.
Why doesn't the US Government give our banks 0% money are you saying? I thought that would be self evident. They need the money themselves to recapitalize their own and Europes at risk financial institutions.
I imagine our banks borrow from non Government overseas sources who price their rates to reflect the perceived risk of Aussie banks and the possibility of a housing market decline.
That is, at its essence, how banks make money.
Yes he has as well as others including Terry McCrann.
If further cuts become more savage, on the one hand those with variable mortgages including property investors will get some symptomatic relief, however on the other hand those seeking less risk in volatile times (especially those advanced in years) by having term deposit holdings will be losers.
CHam, I am no expert either, however as Dazz points out the spin that the banks put out cannot be verified by the likes of you and me. They are first and foremost a large biz that need to satisfy shareholders. If indeed their overseas funding costs are so large and, they might well be, it will be interesting to see if they double dip, by not passing on all of the cash rate reduction yet with the same hand taking the full cash rate reduction from ensuing term deposit rates and online interest rates.
The concerning thing about all this is that whilst the symptomatic relief may be welcome as a sugar rush to most folk, underlying fundamentals globally may also come home to roost here (they haven't yet) with mining slow down, job shedding and the patient ends up becoming an insulin dependent diabetic.
Interest rates are cut for a reason.......and, it's not because things are getting better.
