What does the RBA rate cut mean for property investors?
The Reserve Bank of Australia (RBA) surprised many last month when it cut rates following its first meeting of 2015, but what does this mean for property investors?
The reduction in the official cash rate to 2.25% came in February after the RBA had left rates on hold at 2.5% since August 2013.
The move on rates caught many experts off guard with the majority of analysts predicting that the central bank would again leave rates on hold.
However, delivering its decision the RBA said it made the cut because growth was continuing below-trend pace and that it expected the move to add some support to demand and help to foster growth.
So what does this mean for property investors?
Most importantly investors with a variable-rate loan should review their loans with their mortgage broker to ensure they are receiving a competitive rate and a product that suits their needs.
A property investor with a loan of $500,000 will save just over $100 per month if their rate is reduced by .25%, so it’s important to speak with your broker about your current situation.
The savings may be enough for a property investors to make their next acquisition to further build their property portfolio.
Alternatively, any savings could be used to complete minor renovations on existing properties to demand higher rents.
Furthermore, with historically-low interest rates it might be worthwhile for property investors with variable home loans to fix their rates.
Again, the decision to fix rates should be discussed with your mortgage broker who will be able to recommend the best course of action to take.
However, fixing rates can provide surety over the repayment amounts and can help you save further.
While the February rate cut is beneficial for property investors, there could be further good news on the way.
Many analysts have tipped that the RBA will again cut rates later this year by a further .25%, taking the official cash rate to just 2%.
Whether this occurs remains to be seen, however to ensure you’re receiving a competitive rate, it’s important to regularly review your situation with your mortgage broker.