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What’s up everyone!
So yesterday the RBA cut its official cash rate by another 0.25% W00t!!!
This drops it down to 3.85% and marks the 2nd cut in its current easing cycle which sees the nation’s official cash rate drop from 4.1% to its lowest level since May 2023.
The decision was influenced by a combination of moderating inflation and emerging global economic uncertainties (aka Trump “cough cough”).
The consumer price index, a basket of goods involving goods held in a basket, is a measure of inflation as experienced with consumers in their daily living expenses, dropped down to 2.4% which is in the RBA’s target range of 2-3%.
In its statement, the RBA acknowledged the improvement in inflation but emphasized the need for vigilance given the uncertain global economic landscape.
The central bank indicated that while inflation is trending downward, it remains above the desired midpoint, and future policy decisions will be data-dependent.
I think it’s just covering itself, because as you can see, the trend is your friend, and the trend worm is starting to nudge downwards.
Financial markets certainly anticipate further easing, with projections suggesting at least two more rate cuts in 2025, which means we might see rates falling to at least 3.35% (!!!)
Indeed, the RBA board itself had reportedly weighed up the possibility of a 0.50% cut before consensus was reached on 0.25%.
This rate cut is certainly going to provide relief for mortgage holders, with the monthly repayments on a $500,000 mortgage reducing by around $79 a month or $947 a year, while those with a $750,000 loan will save $118 per month or $1,420 per year.
Despite this, methinks the easing of the monetary cycle means that housing demand is potentially gonna yknow what, which again goes to highlight that you can’t bet against the Aussie housing market.
When times are well, housing performs well as everyone feels “rich”, when times are tough, rates get cut which provides an artificial cushion to prop up prices again – it really is one great big ponzi scheme, decades in the making.
And sure, the official party line is that this rate cut is a “strategic response to declining inflation and global uncertainties”, and that the central bank remains “committed to monitoring economic indicators to ensure stability and sustainable growth” – we all know what it really means.
Start your engines.
For the housing market anyway.
Sponsor’s Post:
We saw that the average monthly repayments on a $750,000 loan have reduced by around $118 per month, but what isn’t more commonly known is how much more borrowing power an individual may have due to the rate cuts.
The answer?
Depending on your income but probably around $20-$30k since the start of the easing cycle, with a couple around $50-$60k.
It’s not a huge amount in the grand scheme of things, but how long would it take to save $30k? To save $50k? That’s the key difference.
And you know what? That’s only a plain Jane ballpark figure, every individual circumstance is different – if you really wanted to get an understanding of your borrowing capacity, contact me today at admin@vemscapital.com or through the website for a confidential discussion anytime.
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P.S. Every post is the personal opinion of yours truly, please seek your own personal financial advice regarding your own personal circumstances.
