Interest Rate Slashed Again - by 1.00%

The Reserve Bank of Australia just announced that Australia’s official interest will be SLASHED by 1.00%.

Most of the Analysts (read Pundits) were expecting a drop of around 0.5%.

Assuming that the Banks in their wisdom decide to pass this rate cut to us - mere mortals, what does this mean to you?

For First Home Buyers:

$300,000 home - with a $14,000 Grant (or $21,000 - if you are buying / building a brand new home) will set you back - $373 per week (principal & interest). The housing market is getting more and more affordable. However, with more affordability comes more demand and hopefully (well not for you though) property price increases.

2009 will be an interesting year because of all this uncertainity, most Propety Investment Gurus are not willing to openly predict where the market will go in the next 12 months.

Probably the biggest challenge for First Home buyers is the sudden disappearance of 100% loans from the market. Many banks, including Commonwealth has pulled out of this market - as they want to be more “careful”. There is probably only a handful banks / financial institutions who are willing to do a 100% loan for the first home buyer. You will need to look around and carefully do your analysis. If you require any help in this matter, please do not hesitate to call.

For Investors:

Most investors, who are holding on to old stock should see their cashflow turning positive. However, this may not be what you want, as the property becomes positively geared then that means your tax benefits will reduce. You will need to re-evaluate your portfolio to maximise cashflow, capital growth and tax benefits. If you need any help to do this, please let me know and I will guide you to the right people.

Current Home Owners:

Sit tight! Keep paying your mortgage - if you can at a higher level - I have recommended some of my clients to keep paying their home loan at the 7.5 - 8% level - just because they could and that means they will pay their home loan off much quicker than the average home owner.

The other option is, if you are looking at capitalizing on the market, then look at investing in property.

Just a word of caution

DON’T go and talk and try to get advice from your neighbour or uncle or grandpa who has never done any investing. Please DO your research, read a lot of books on the subject and talk to people who are successful in property investing. If you want some references, please contact me and I will get you in touch with some of my mentors, who are doing great things.