RBA Drops Rates - What does that mean for my Home Loan?

The RBA recently dropped its cash rate by a quarter percent and although this is a positive move forward it does little for someone with a home loan when on average the savings equate to around $40 per month.

The RBA have touted that they will be decreasing interest rates again a further 3 or 4 times across the coming 12 months, then and only then will the home loan market be able to breathe a sigh of relief. When the average person all of a sudden has a further $200 to $300 per month will the market start to grow again, these savings will help compensate for the higher cost of fuel and in turn day to day living.

There have been rumours that the RBA may decrease interest rates again prior to Christmas, now is this to help people with home loans? I don't believe so, the real reason this move would happen is to inspire some confidence in the general market leading up to the crazy Christmas shoppign season.

You see if people believe that they have more available funds because of home loan repayment savings then human nature dictates that the first thing one does is to go and spend it! This may sound insane but is it a ploy to inject some life into the struggling retail sector, if the RBA does decrease home loan interest rates then the most likely result would be a stronger Christmas trading season for all retailers.

The flow on effect of this is that jobs will remain in place and potentially grow within the sector itself. Mums and Dads will be happy as they are able to buy those items they couldnt afford a few months ago and the average Australian has a smile on their face.

When the general populous is happy then consumer confidence increases and this has an impact across all market spaces.

As far as the home loan market is concerned there is a long way to go before a real positive impact is felt through the RBA's decrease in interest rates, I forecast that this is at least 6-8 months and 4 decreases away.

When it comes to home loan providers and the property market there is still a dim light there although the tough times will remain for another 2 years at least until we see the growth truly come back.

For more information on home loand and other financial products please visit my website which is www.aussiewisefg.com.au and you can contact me there.