mrd

Attention All Mortgage Holders!!!

The Reserve Bank of Australia (RBA) meets again tomorrow for the 2nd time this year to decide whether or not to move the official interest rate!

Reserve Bank Cuts Interest Rates?

The Argument for another rate cut…

• Monetary policy required to stimulate spending within the economy to stave off job losses
• Evidence that the Rudd Government’s first stimulus package had only a marginal effect on the economy
• Continuing talk of job losses
• Consumer sentiment recovering somewhat slower than hoped
• Touch and go whether we will avoid (or fall into ) recession

In my opinion, this all points to yet another official interest rate cut being announced tomorrow, after the RBA board meets.

So, the $64,000 question is “by how much will reserve bank cut interest rates?”

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At the peak of the interest rate cycle the standard variable of the big 4 banks was 9.57%. Assuming you took up the offer of a professional package with the banks and qualified for the full 0.7% discount your interest rate would have been 8.87%. For a peak rate, that isn’t too bad considering long term history. I recall buying my first home in 1994 when the rates had come down to a low 10.5%. They then dropped to 9.5% and I was dancing with joy at how much money I was saving and how cheap interest rates were.

How times have changed.

To demonstrate how the changes in interest rates affect your holding costs I will use the properties at Endeavour Gardens as an example…

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The Reserve Bank of Australia (RBA) will meet for the first time this year, next Tuesday. While it’s difficult to know exactly what they will do with official interest rates, I expect another generous reduction to be handed out; probably 1%; but certainly at least 0.75%.

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To make sense of the property market we must separate opinion from fact. Opinions will always be heard… just in greater numbers now perhaps. If you are prepared to “drill deeper” and dissect the evidence available; the facts will speak for themselves. There’s no reason for allowing the conflicting voices of opinion to keep you confused!

In the current round of Web Seminars we are offering, I highlight four key factors that are a MUST… if you expect to draw any credible conclusions.

1.    Record Population Growth
2.    Investors Have Fled The Market
3.    Home Ownership Unattractive
4.    New Construction Has Stalled Badly

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Last month I felt there was a very strong case for the Reserve Bank of Australia (RBA) to cut the official interest rates by a full 1%. I kept my considered views to myself but wished I hadn’t afterwards (as you do).

This month I considered the arguments and reasoning put forward by economists, journalists and commentators; who mostly said that rates were likely to drop by 0.5% (although some argued a case for just 0.24% and others no rate cut). I concluded that the likely rate cut would be 0.75% (or possibly more)…

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Last month there was talk that the RBA would drop official interest rates by 50 basis points or 0.5%. I believed there was justification for them dropping rates by a full 100 basis points; or 1%. I kept my opinion to myself and as history has shown, they did…

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	Hi Nick, what is your opinion of superannuation and do you make contributions into super as well as continue to build a property portfolio?
	The first thing I must say here is that I can only tell you what I do and my opinions why. I cannot offer (and am not offering) advice on what any individual should do in their own situation. Suffice to say that I am not a believer in Superannuation and I do not make personal contributions. My reasons include, but are not limited to:

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The latest Queensland state accounts show continued baseline strength with a revised economic growth increasing to 4.4% for 2005/06. In comparison, national rate of growth is sitting at 1.4%. Deputy Premier and Treasurer Anna Bligh says faster growth in the business sector, housing investment and consumer spending have all contributed to Queensland’s stronger economic growth. “Business investment in Queensland surged by 20.5% over the year to September 2006,” she says. “That compares with business investment growth of 0.4% in the rest of the country. That means that Queensland’s rate of business investment is 50 times that of the rest of Australia.”

Over the year to December 2006 trend employment increased by a total of 97,100 people with 92,100 of those being full-time jobs. “Despite containing less than 20% of the nation’s population, Queensland accounted for more than one-third of national employment growth in 2006 and over 43% of full-time jobs growth,” Bligh told Parliament this week.

Queensland’s trend unemployment rate reached a generational low of 4.1% in December 2006, substantially lower than the 4.7% recorded in the rest of Australia.

Source: QBR