After the comments both Simon Turner and myself made earlier in the week both predicting and welcoming the Reserve Bank of Australia’s cut to interest rates by 25 basis points, I have received many thoughts from vendors, buyers, agents and other consumers all agreeing that such respite is indeed welcoming.
One response, however, stuck out. A suburban agent who shall remain nameless, in an exceptionally long email to me stated that the cut would make “no difference” to any Australian.
I do not wish to get into a pointless to-and-fro match with someone with whom I will not add credibility to his opinion which was clearly just a cheap attempt at scoring a few visits to his blog, and is ultimately not in touch with reality, but I do wish to reaffirm the positive effects that the RBA’s decision will bring and make clear that negative naysaying is lazy, un-inspiring, and of no help to Australian’s that simply are looking to get-ahead and make ends meet.
The facts are clear – a cut to the interest rate of a home loan of course makes a difference. The major banks had already passed on a quarter of a per cent to fixed rate home loans in the last fortnight, and indeed equaled the RBA’s cut this week, with St George cutting theirs by 30 base points.
Based on a 25-year loan on a new rate of 8.65 per cent, mortgage holders will make the following savings:
Loan Amount Monthly Saving
A saving is a saving, and more will be welcomed to relieve mortgage stress. I’m sure an increase by 25 basis points rather than a cut would have made a huge difference to many hip-pockets. Enough said!
From a global perspective, Australia is looking in pretty good shape. Australian households have cut their spending for the first time since the country was last in recession, whilst business investment has continued. Furthermore, all Australian State and Territory economies have grown, with the added exception of New South Wales (which probably says about as much as the state of Morris Iemma’s hapless government).
We’re not out of the woods yet, but Spring is here and it’s a breath of fresh air!