Official cash rate reaches record lows

Mortgage Choice welcomes further boost to recovering economy  

The Reserve Bank of Australia’s (RBA) decision this month to cut the official cash rate to 2.75% takes it to a record low since reporting began in the 1990s. The announcement should provide much needed relief for many Australian households and boost activity in the property and retail sectors. However, it is important to make the most of the potential savings, advises Mortgage Choice.  

According to local Mortgage Choice mortgage broker, Melissa Jackson, the RBA takes many factors into consideration when deciding whether to cut the cash rate, but this month’s decision was very likely influenced by the unexpected rise in unemployment, from 5.4% in February to 5.6% in March.  

“There is no doubt that the labour market is subdued, and many economists see this trend continuing. However, it is unlikely that the Reserve Bank acted to cut the cash rate on one month’s employment figures alone. There are a number of other factors at play in the decision,” Melissa said.  

“Inflation has been sitting at the lower end of the Reserve Bank’s target band of two to three percent for some time, providing room to move the cash rate. At the same time, the high Australian dollar has affected our terms of trade and made things tough for exporters, and there is hesitation forming around the looming federal budget. Couple all that with recent reports of falling property values, and it appears the RBA took the opportunity to cut the cash rate to help stimulate the economy.”                           

Melissa also pointed to falling consumer and business confidence as further reasons for the cut.  

“Vital to the economic recovery is consumer and business confidence. The Westpac Melbourne Institute Consumer Sentiment Index fell by 5.1% from March to April. It is hoped that the latest cash rate cut will turn this trend around and help drive Australians’ confidence up, along with already improving longer-term retail sales, auction clearance rates and private treaty sales, plus housing finance commitments,” said Melissa.  

Melissa went on to explain the very real benefits of a rate cut.  

“Retailers will be rejoicing in the hope that the rate cut is passed on by lenders and helps to increase discretionary spending. However, for many mortgage holders, the cut will likely represent a real cost saving. If they are able to use the savings to contribute more to their loan, not only will they repay the debt sooner and build up more equity, but they will also have in place a good financial buffer for times of need,” Melissa said.  

“Keep in mind it isn’t just retailers and mortgage holders who stand to benefit from the rate cut. Those considering getting into the property market may get the reassurance they need to make their move sooner rather than later.”  

First Name concluded by calling on mortgage holders to make the most of the rate cut.   “You work hard for your money so you want to make sure it works hard for you when it comes to your home loan. Keep a close eye on how your lender responds to the cut,” said First Name.  

“If they pass on all or at the very least, majority of the cut, do yourself a favour and continue to make repayments at the pre-rate cut level. On the flipside, if you aren’t happy with the outcome, you should do your research and seriously consider your loan options.”  

If you want to learn more about your home loan options, call 0405 315 227, or log onto www.mortgagechoice.com.au/melissa.jackson. For further information or to arrange an interview, please contact:  

Melissa Jackson

Mortgage Choice

0405 315 227

melissa.jackson@mortgagechoice.com.au    

Important information  

This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the advice, consider its appropriateness to your circumstances.  

About Mortgage Choice  

Mortgage Choice has sourced a home loan for well over 350,000 people since 1992. It works with all manner of property finance borrowers via hundreds of franchises.  

The company writes one in every 25 home loans in Australia by providing professional guidance on, and choice of, products offered by an extensive panel of leading lenders. Many of its brokers provide a broader service, helping customers source commercial and personal loans, asset finance, deposit bonds and providing referrals for risk and general insurances.  

Uniquely, Mortgage Choice pays its franchisees the same commission rate for home loans they write, regardless of rate paid by the lender a new customer selects, working in the customer’s best interests to tailor a solution to them.  

To cater to the growing needs of our customers, Mortgage Choice soft-launched in October 2012 its new financial planning business. Mortgage Choice Financial Planning will officially launch in FY14.  

The company has no balance sheet or funding risk, and consistently delivers strong profits and attractive yields. It listed on the ASX in 2004 (MOC) and is a member of the Mortgage & Finance Association of Australia (MFAA).  

Recent recognition: 2012, 2011 Australian Broking Awards Major Brokerage of the Year – Franchise; 2012 Australian Broking Awards Best Training and Education; 2012 Australian Broking Awards Best Ethical/Social Responsibility Program;  No.1 on The Adviser magazine’s 2012, 2011, 2010 and 2009 Top 25 Brokerages list; 2012, 2010, 2009, 2008, 2006 and 2005 MFAA Awards Retail Aggregator/Originator of the Year; 2011, 2010, 2009 and 2008 10 Thousand FEET Top 10 Franchise list; 2010 Forbes Asia-Pacific Best Under A Billion list.  

Mortgage Choice holds an Australian Credit Licence: no. 382869, issued by ASIC.  

Visit www.mortgagechoice.com.au or call customer service on 13 77 62.

Posted in: Interest rates

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