What will the rate cut mean for you?

I'm a little surprised that Pato is the only one looking the gift horse in the mouth.

Why did the Res drop the rate 1%? If they were simply being nice to us, they could have done so months ago, so I suggest you can rule out it being an early Xmas present. It was a dramatic, possibly drastic, move to head off some troubles that they see ahead. The only problem I can think of which they could see as being worse than inflation is deflation/depression.

I'll wait till I can answer that question before I plan my next move. In my mind, the odds on high inflation are shortening so I have withdrawn a property from the market.
 
wally said:
They didnt predict 1% but now they predict another 1%, they (economists) have no idea....
Click to expand...


It is just like the weather bureau; we get a bad storm they haven't predicted; the next time the weather looks a little unstable, they predict a bad storm like the last time, but it never eventuates.
 
We'll be saving over 1K per month on repayments, which will be a great help as things are tight at the moment. Due to the rate cut, we now have 2 cf+ and 1 cf neutral property.
 
:( Only PPOR is not fixed - saving of $900/year.
:)Planned new borrowings for a build (if we can still get it on no-doc) will be at a lower rate and will be very CF+ from the start.

Louise
 
JenD said:
Hi all,

Well, the RBA rate cut of 1% was certainly a shock for us - but quite welcome!! I'm interested to see what the rate cut will mean to you?

For us, this will mean around $7k in savings if this lasts at "todays rates" for 12 months. On the other hand, I expect it will make us less inclined to push up our rentals when leases end (for the good tenants :rolleyes: ). We will certainly keep them within market rates, but I won't have to worry about possibly losing a great tenant by increasing the rent - because if interest rates stay where they are, I probably won't do it!

We've always had a strong buffer in place (with aimed neutrally geared properties), but I don't think we were the only one's wondering after the past 12 months of interest rate rises, doom and gloom - how much is enough for a buffer? We were always planning on buying again this year, and have made some offers -but now our confidence is that much higher that we don't have to worry so much about reducing our buffer when we use some of those funds for the deposit.

If the doom and gloomers are right, and RE prices drop - we will have to live with that, but we aim for neutral geared properties so it really won't have too much effect since we're in it for the long-term. The buffers have always made it possible for us to stay in it for the longer term - and now with today's interest rate cut, our buffers are all that much stronger :D

I am for one looking to buy (always was, but this interest cut has just helped with that SANF a bit more!!)

What about you?

Cheers,
Jen
Click to expand...

It'll mean more cfp for us, and a saving of around $13k per year in interest.

That's more funds our way for debt reduction and more equity building.
 
About $1,600 better of per month. Nice :eek:) Other loans fixed.

Still not back to neutral but refinancing, lower rates and increasing rents are moving me faster than I hoped for. Nice to see the buffer will stretch a lot further....
 
What to Do

With the cut in interest rates, we would be saving an extra $160 month on our home loan. As a newbie to all of this, is it better to wait and leave that extra amount work on our mortgage while we see what happens to the market? Or reduce our repayments, buy an IP and put the money towards what's needed for that?
 
maybe slide the extra money you weren't missing previously either

a) back onto your mortgage or
b) into an offset account.

if i were starting out, that's what i'd do. either way, you save on interest. but i'm not starting out anymore, so this doesnt constitute relevant advice blahblahblah
 
Most of our loans are fixed so negligible effect for us.

Perhaps some cashflow neutral properties on the horizon though - especially when prices come off further.

Could be time to start looking again!

Regards Jason.
 
beachgurl said:
We'll be saving over 1K per month on repayments, which will be a great help as things are tight at the moment.
Click to expand...

Same here.

This interest rate cut will take off a significant amount of pressure
and this is good for us and for our tenants.

Cheers
 
Both loans are on variable so we save about $700 a year.

More interested in not losing a fortune in capital gains tax at the moment, and all the flow on effects from having our income multiply up by such a huge amount in a year. Bigger numbers than $700 there.
 
Blue Card! said:
maybe slide the extra money you weren't missing previously either

a) back onto your mortgage or
b) into an offset account.

if i were starting out, that's what i'd do. either way, you save on interest. but i'm not starting out anymore, so this doesnt constitute relevant advice blahblahblah
Click to expand...

Yep this is my plan. With the cut I'll save $90 a month, this will go directly to my offset account. My repayments will be $1100 a month, so I am going to assign $1600 a month towards my offsett account. Of the $800 $550 will be deducted for my mortgage repayments and the other $250 I wont touch. I think this is achievable.
 
bradlou said:
With the cut in interest rates, we would be saving an extra $160 month on our home loan. As a newbie to all of this, is it better to wait and leave that extra amount work on our mortgage while we see what happens to the market? Or reduce our repayments, buy an IP and put the money towards what's needed for that?
Click to expand...

It would depend on your current LVR in my opinion.

If it is at 90% or higher, I'd be reducing debt with the excess. Start with the non tax-deductible stuff first.

In this current economic climate, you want as much padding (debt/equity ratio) as you can get; rate cuts notwithstanding.

This will make your financial position safer, and give you more serviceability and equity for borrowings on the next IP.
 
With the current rate cut I’ll be $700 per month in savings & planning to use it towards my next IP purchase.:D

I think we have another 6 months until things really start to bet back into shape, I have a feeling that next property boom is getting closer, especially for Sydney, but that’s my view.

Cheers:)
George
 
Hah ... just got an advertising slot and now with that and the yellow pages ad we took out, the 1% rate cut on the two mortgages is now LESS than our advertising spend for the year!

Which doesn't stop me being ravingly happy that we got a slot in like THE best advertising place locally because someone else cancelled :D
 
Well, I am a fair way from happy days yet, but....

I now stand to chop off another $900/month from my NG cashflow! I have had two full nights of sleep in a row!:eek:

Regards JO
 
We are around 1k/mth better off. Still CF-ve though. Does anyone know what happened last time rates came down quickly and suddenly (not that this has happened yet). I am assuming it would be better to hold onto all loans and even get some more property in case credit freezes up like some are predicting.

I am interested in peoples view where they see the following items heading in a quickly falling IR environment.

1. Rents
2. Property values
3. Construction costs
4. Credit availability
5. Inflation
 
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