A cash rate Christmas present from the RBA
What are you hoping for this Christmas? A new watch? Perhaps good conditions so you can carry out your property investment strategy? If the latter's perhaps been on your mind, then the Reserve Bank of Australia (RBA) might just be your Santa Claus.
The organisation has kept the cash rate stable at 2 per cent in its December meeting, which means it now won't change until at least February 2015. But what does that actually mean for you?
Conditions are relatively good for property investment
"Overall conditions are still quite accommodative"
There's no two ways about it, things have gotten more difficult for people seeking out capital gains recently. Higher interest rates on home loans and affordability constraints have made it less than easy, but RBA Governor Glenn Stevens made a good point when announcing the cash rate on December 1.
Speaking on borrowing levels, he said: "while the recent changes to some lending rates for housing will reduce this support slightly, overall conditions are still quite accommodative".
This means that even if things are a little more difficult than they were a few months ago, relatively speaking, property investment is still a sound way of creating wealth – with the right advice, of course.
There could be more cuts on the way
In another response to the Christmas cash rate, Real Estate Institute of New South Wales President John Cunningham said that a lot of experts actually think the rate is going to be cut by the RBA board when February comes around.
This could mean interest rates go down even further! After all, when the RBA went to the all-time low of 2 per cent in May, lenders followed suit and we got some of the lowest interest rates we've seen in 50 years.
However, they have gone up again in recent months rather than keep pace with the cash rate, which might be cause for concern. But the cash rate affects more than just interest rates. Harley Dale from the Housing Industry Association has said that low interest rates mean construction is going to look much more stable as we head into the new year.
So, take a look at that Christmas wish list. Whether you've put down property, wealth creation or maybe just a nice new cologne, the Reserve Bank appears to be working in your favour. When you want to step up and start creating wealth, make sure to give us a call so we can help you with a tailored strategy.