What will the interest rate cuts mean to you?

Question

The Australian Reserve Bank has made their first interest rate decrease in 7 years. What will that mean to you? Will it make a difference in your pocket or is it still going to be a struggle?

Answer 1

The drop in interest rates almost certainly means that if I time it right I will get more for property I plan to sell soon. On the other hand my investment income will go down. It all balances out in the end.



I won't be struggling because of my family background in business, which trained me to make the right investment choices as a young man. I bought the best house I could afford taking the mortgage payments, and potential fluctuations, into account when I was 23. You have to do this - housing loan rates hit 17% in the mid 1970s and in the late 1980s, under the Whitlam government and then under Keating. Commercial rates peaked when John Howard was Treasurer prior to the Whitlam government.



Because my family have been in Real Estate since I was a child, I have had an interest in housing prices relative to average income, and have looked at figures right back into the 1950s. The relativity between house prices and average income has stayed pretty much the same. The only changes are that the average house today is further from the CBD and the average new house is larger and has more bathrooms and garaging. Both these factors make current houses look more expensive, but they are not if you adjust so you are comparing apples with apples

Answer 2

Nothing! houses and such high loans are beyond my reach for now anyway!!!

Answer 3

The Reserve Bank has put us in a tight bind instead of managing the economy properly. It has raised the interest rates twelve times in order to slow what it claims to be an over heated economy. Prices were very largely forced up by John Howard's' tax cuts and increased oil/peterol prices although most voters didn't realise this and kept voting for him and the interest increases kept coming.



The interest rate rises slowed the building of new houses. Hence we have a shortage of new houses and flats and land lords are charging high rents. These will not go down until we get more housing which will not be in the short term.



The interest rate reductions will need to be significant - at least one or two percent or 100 or 200 basis points, before they start to have a real effect of the economy. The world economy is slowing with England in recession and some major European countries, Germany and France heading that way. Some more interest rate cuts should be on the way.



The people who will suffer from interest rate cuts are self - funded retirees and pensioners who depend either wholly or in part on interest income for their living. This will make it more difficult for them. They will either have to ask the government for more pension or seek other sources of investment income as many of them can't return to work. Some may have to use up their reserves and go on the pension.



The interest rate cut is also good for farmers who have debt. Their repayments will not be so great. It will be good for home owners who have to make repayments. It will be good for small to medium business owners carrying debt as they also will not have to make such large repayments.



However, if the economy slows too much, farmers and small businesses will have to put off employees. This will mean that the employees will not be able to pay their mortgages. Also some of these small businesses and farms have already and will continue to fold. This in turn will put people out of work. This is an arguement for further interest rate cuts. It helps to encourage investment in the economy to restart business and get people back to work so that they can start paying their mortgages where they have managed to hang onto their houses. This is why it is a good idea to pay off your house as quickly as possible. You do not leave yourself at the mercy of economic change.



Hope this helps to clear the air on interest rate changes. REserve bank manipulation of interest rates is Monetary policy. Government spending is Fiscal policy. Wage setting by what used to be the concilliation and arbitration court is wages policy. These three sets of policy are what govern our economy.



Cheers!!!

Answer 4

Little to nothing. Just enough to show a slight slowdown in the recession and the rich keep on being rich....

Answer 5

Can I just say that an interest rate decrease means nothing to mee due to the BANK! increasing my rates when there was NO increase from the reserve bank.....when I phoned them and questioned the increase they told mee it was a "buisness decision".........Well excuse mee but I would like to make a buisness decision in my house hold and not to pay the extra .02% and be able to put that money towards my kids education which is alot better in the long run!.......how much profit did the banks make this year????

Answer 6

I don't have investments and it means i still cannot afford to buy a house

Answer 7

Not going to make a difference to us at all as we are on a fixed rate. For us to get out of our fixed option, the rates would have to drop more substantially for it to be worth it for us.

And nofret - no, not all first home owners want the big mansion then whine about not being able to afford it. My partner and i purchased our first home at the start of this year, its a basic three bedroom timber home - nothing fancy, but we have to start somewhere. It really bugs me when the older generations say that all the young ones are only struggling because they want the best and dearest of everything - thats simply not true.

Answer 8

my invested monies will earn less interest, not good for me, to live on

Answer 9

Unfortunetly nothing,like many I am renting . We tend to get forgotton ,as the interests rates go up so does the rent (recent $50 week increase) somehow I doubt if it will go down again. What with rate increases ,interest rates and body corporate fees .Renters are also very much affected. However like homeowners and investers our pay does not increase .So next time there is another cut or rise ,give thought to the tennant who is also affected and at the mercy of the landlord,banks etc .

Answer 10

To make a noticeable difference it would need to drop down to around 7%. One can only hope

Answer 11

It would mean that I would be putting more money to the principal loan rather than give it to the Bank in the form of interest. But then again, talk about the difference in my pocket, nothing really, unless my bank decides to lower down the amortization amount due to the decrease in the interest rate. But I am not that hopeful, just before the rate cut, my bank increased the amortization amount. Tricky. Other banks, I've heard, had a previous increase in interest rate before the announcement of the RB to cut the rate.

Some banks are even going to delay the decrease in rate for up to a month. Gosh, but when the RB announce rate increase they are on it the very next day. That is unfair.



Unless the RB regulates the interest rate increases by the banks, nothing will be done to alleviate the condition of the common masses. Banks would still one way or another be able to find a way so that their bottom line figure is not affected. Something must be done about it.

Answer 12

Very, very mildly bullish. 1) Interest rate cuts are always slightly bullish because of interest rate parity. 2) The Euro has been depreciating because of economic problems in PIGS countries. The problem is not the cost of funds for banks; the problem is the funding costs for countries and ECB lowering bank lending rates does not affect that directly or even very much indirectly. So in this sense, ECB lowering rates is irrelevant to Euro. 3) Europe like the US is caught in a liquidity trap. It is very doubtful that a less restrictive monetary policy is going to do anything. In this sense irrelevant for Euro. 4) ECB should make some other announcements along with dropping interest rates. For the life of me, I can't think of anything very helpful that it is anything likely that they announce. However, if ECB announces something like a new bond buying program supported by German funds (hah, not likely) the Euro would go through the roof. The market does not think things like this are very possible and I highly doubt that any will happen. But this also means ECB can't really disappoint since expectations are so low. In general, look for a mild rebound in Euro on a politically palatable ECB plan. There is nothing big gonna happen though...

Answer 13

It means absolutely nothing at this point. We purchased our first home 1 year ago and have already been through 6 interest rate rises. Our bank has independantly increased rates over the reserve bank, inflating the interest we are currently paying. The RBA would have to cut rates by at least 1 - 2% for it to make any real difference to homeowners on an average income.

Answer 14

Some savings, but the rate will go further down. The reasons? Industrial Laws caused big profit in the stock market. The stock market was the main reason - not firstly inflation - for the banks pushing on Reserve Bank for an increase of the interest rate. The RB could do that because the FG at that time was leading the "network" with no resistance. Any excuse was good at that time to push up the interest rate but the real cause was the stock market combined with Industrial Laws. The prosperity of many pushed prices up, combined with cost of fuel, which could have been better controlled with Hydro/NG conversion and not only LPG.

Because the wealthy could afford to pay more for "bananas" they said monthly that we spend too much, but in fact families could buy less bananas and wealthy more Mercedes... and at the end there was too much spending and inflation with consequential more excuses to increase interest rates. The Reserve Bank knew it all and disagreed on real causes, then somebody prayed to hit the stock market to brake the vicious circle... and here we are. There was no need for pulling down the prosperity of Australia. Justice and Fairness are the golden rules to rebuilt a balanced prosperity still in trouble. Banks and lobbies should check the dusty book of business ethics in order to enjoy real and stable economic prosperity and stop paying millions to executives otherwise skilled.

Answer 15

a 0.25% decrease in the interest rate indicates that the rates are not getting up any more, many people are under high pressure and they expext at the end at least a 1% drop, that would start helping the people. A quater drop means not so much really but still takes of the pressure for thinking of even higher rates!



thanks for participating



Stuart

Answer 16

Nothing!! I have one up on the banks, I fixed a few years ago at 7% so while everybody id paying 9% I am only paying 7%...so I consider that a win for the small fish. I do feel for the people struggling

Answer 17

It is a psychological relief. Last 4 years that I have had the loan, the story has been like I kept paying back more and more principal but the interest figures never came down. Now I am waiting to see that petty decrease of a few dollars to convince myself that it is better than a rise.

Answer 18

this quetion is wrong ,because the banks has started raise the interest from 2002 and all of thoses increases has caused all the strugels in family budgets ,so how can only one small deduction on the intrest rate can help ,I think the number of reduction on intrest rate should be the same time as they have raised ,if the number match like every monthes for ... then every one will go back to feel comfortable again .

this one time is nothing really .

Answer 19

Nothing - One interest drop makes no difference compared to the nine previous increases. One does not have to be a genius to work out that what the banks give with one hand they take with the other. Less interest income usually means more bank fees !

Answer 20

It will make a tiny difference in a positive way, which is definitely welcome. However, we've just gone through interest rate rises month after month after month after month, so the benefit is more like a chance to catch our breath for a month than a really significant difference. Any chance to make an extra repayment without then being slogged 95% of it again in interest is great though.

Answer 21

As we are a one income family with children, this interest rate decrease won't help much as children's needs and family supplies increase, so I would have to say that it will probably even out in the end, and will not help one bit, we need at least another ten decreases to help with most families these days, to survive and pay off our mortgages.

Answer 22

When I bought my first house in Melbourne in 1972 the interest rate was 16%. There was a credit squeeze on so most banks were not giving housing loans unless you had a big deposit - say 30%. Our first house cost $A25,000 and I earnt $A 2,500 per YEAR. We had $A8,000 deposit. I think houses are reasonable now, for what they are. It is just that newly married couple want everything when they move in to a huge 5 bedroom, two bathroom, double story house - big TV, modern furniture etc. on top of the house cost. I know I sound like an old foaggy but I am a bit tired of young couples saying how hard it is.

Answer 23

It means nothing RAMS & the rest jacked their rates over the reserve rate several times but gutless Rudd & Swann wont make them come down, after all Rudd & Swann get 10% gst on the increases. if you change lenders Rudd & Swann get another go at 10%gst of your refinanced home loan.Plus they get the 10% gst on the refinance fee RAMS jacked their fee from $250.00 to $2500.00. 10%gst of $2500.00 is a lot better than 10%gst of $250.00.Hence Swann telling everyone to shop around for a better deal & swap lenders,did you see the smile on his face getting another 10%gst. Rudd & Swan dont care what happens they get 10%gst no matter what.The banks claim they lost money in the so called sub prime lending they didnt, the US Government dropped the interest rates all our rip off lenders did deals to get the cheaper rate for them but did NOT pass it on for us.

Answer 24

Interest rates on mortgages have been cut (0.25 %) what a joke. When they rise, credit card interest rates rise, overdrafts on bank accounts rise and personal loan interest rates rise. I can guarantee that the greedy financial institutions don't drop those rates

Answer 25

Not much - I regularly pay above my monthly minimum anyway - & will continue as the rates drop - so it'll mean I'll either :-



a/ pay the house off quicker



or



b/ have more to redraw in case there's an emergency.



.

Answer 26

The exchange rate between currencies is changed. AUD is devalued. Now I can exchange 1 AUD less than 27 NTD. It means I save money when I live in AU.

Answer 27

Means a few things to me.

Firstly I can actually make some cash from my investment property (a few dollars a week, but hey, it's a start).

And whats even better, as a person who owns a small business, my customers can start feeling a little better and spend some $$$$$.

It's only a small % change, but its amazing how it can effect people.

Answer 28

So Many People have been harpering about the 7? Interest raises, over the yrs of the Howard Government.

Firstly, everyone appears to be blaming Howard, do they shoot the messenger who tells them their Great Auntie, twice removed, has had a mild case of Indigestion ?????????????

2nd, Has everyone forgotten the number and %, of Rate rises that were implemented under the Keating Labor Government.

My Bank Statements are still SCREAMING in TERROR ! ! !

Answer 29

I will be out of pocket by 10's of thousands $ because I have so many investment properties in Iraq.

Answer 30

Nothing to myself! I am still living with my parents, but it will mean alot to those struggling families. Whom barely survive. Even a couple dollars has to mean something. Be grateful for the decrease, rather than an increase.

Answer 31

In the last 9 months our rent has gone up 2 times by $30 each time.....landlord says it is because of high interest rates. !!

SO now that interest has gone DOWN does that mean we will get our rent lowered ??? "I dont think so !!!! >>>>>

Answer 32

virtually nothing as a pensioner no increase in budget and more rate rises once again the Labour party does what it is good at destroying Australia's economy

Answer 33

No difference. We will be saving $7-00 a month our mortage low we will still keep paying our normal repayment

Answer 34

little to nil TEMPORARY relief.lending agencies will just have to create or increase other fees ,lay off employees or make executive staff take a pay cut (lmao) to maintain their profit forecast.whatever it takes to keep the lowly worker in his/her place without affecting their own place in the market.the only real difference would come if the r.b.a. had no increases for the next seven years.nothing to get excited about,after all, the r.b.a. did us few favours recently,let's see what happens next time they sit....

Answer 35

Absolutely nothing. Still struggling with the cost of food and living regardless.

Answer 36

I'm afraid it means alittle bit less than nothing at the moment, but I hope in the future it will give everyone a working chance to own a home.

Answer 37

I have four adult children, young, but trying to get a life in the adult world and these interest cuts will encourage them to keep trying for they own piece of land.

Answer 38

It will mean nothing... I don't think I'm ever going to be able to move out of home. Makes me wish I was born a mere 5 years earlier! (Or moved out when I was 16!)

Answer 39

I think the .3% drop in interest rates is a positive and whilst this one will present with little to no evidence in the size of my purse; it promises much in terms of future prosperty, the fruit of which will be felt with the next two drops. :-)

Answer 40

I'mm still in high school and only have a part time job, so Interest cut rates will have little impact on me, if any.

Answer 41

I might be able to afford that extra tank of petrol to get to the coast for a surf.

Answer 42

The only difference it will make to me is perhaps shortening the time it takes to pay it off, that's about all.

Answer 43

i am lucky to be owning my house and it's a struggle to save let alone if i were paying off a mortgage

Answer 44

Nothing to me, if it keeps getting cut down then I can afford to buy pads instead of using toilet paper so that will be great

Answer 45

it means my savings are going to be getting less and less money, and seein as I am an 18 year old, the ramifications of this loss of money so early in my working life are going to stay with me forever.



Thank-you RBA...

Answer 46

it means that i can put more onto the loan in regards to extra repayments.



this will be huge in the long term hopefully and that there will be more cuts coming up.



Think of the benefits people!!

Answer 47

no struggle here, wasn't one of the many idiots to push myself to the edge and then whinge about it...meanwhile most of the whingers are living in mansions and driving $40,000 cars....deal with it!

Answer 48

it will mean a lot to the average aussie especially the young still paying of there home loans and having to pay school fees .for there children.

Answer 49

looks like the savers will lose money < they should not be taxed on interest made on there savings

Answer 50

Every little bit helps

Answer 51

Nothing to me, my parents are the ones that spend most of the money.

Answer 52

means if u borrow money u pay less interest

Answer 53

it wont make a difference to me as i am still fixed at 7.09%.

Answer 54

it will mean less loan payments each month

Answer 55

less interest for my savings :(

Answer 56

maybe an extra loaf of bread.......but that's all. pathetic really

Answer 57

JACK SCHIZEN....