RBA Rate Cut – Record Low

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On Tuesday the 4th of June, the RBA announced their decision to lower the cash rate by 25 basis rates. In this short video, Daan Jansen explains what the changes are and what it means for you as investor.

Some further notes from Daan on the property market:

  • Negative Gearing – The federal election outcome has removed the uncertainty surrounding taxation reform. Negative Gearing is here to stay. well, for the next few years at least. Great news for property owners, prospective buyers and in particular investors.
  • Broker Commissions – Next 3 years no drastic changes are going to be made to the commission structure of mortgage brokers. Given that mortgage brokers are involved with 60% of all mortgages in Australia PLUS the significant role they play, ensuring their customers have the best package suited to them, now that we find ourselves in a market with reducing interest rates.
  • First Home Loan Deposit Scheme – 10,000 new home buyers with at least a 5% deposit saved up are going to get assistance in the form of a government guarantee up to 15%, hence, also eliminating the requirement for Lenders Mortgage Insurance, saving the new home buyers lots of money and therefore stimulating the property market.
  • Assessment Rates – rather than the minimum of 7.25% assessment rate, which the banks must use at a minimum to ascertain if prospective borrowers are ‘future-proof’, we will see a 2.5% buffer above the current mortgage rate. There are already some rates out there at 3.19% (extreme example). These lenders could use an assessment rate of 5.69%, at their discretion of course. A more realistic approach to assessing servicing capacity will definitely have a positive impact on the property market, stimulating more activity.
  • Rate Cut(s) – We saw a rate cut of 0.25% early June and most of the lenders have passed on the cut in full. Keeping in mind the reason why the rate was cut (low inflation, cracks in the labour market), this cut and future cuts always provide some positive influence over the property market.

All these factors combined will see our property market bottoming out and turning around quicker, I daresay.

I forecast we will see a small upturn in property values by the end of this year.

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