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Oct 12

How to reap the maximum benefit from an interest rate fall

Here are some simple steps on how you can maximise the financial benefits from an interest rate cut.

With the Reserve Bank of Australia (RBA) cutting interest rates this week, now is a good time to reassess your finances and ensure you are making the most of the latest interest rate cut.

The following strategies will help to maximise the financial gains from a rate drop:

Use the extra cash wisely

The 0.25% rate cut means a $600 saving per year in payments for the average Australian mortgage holder with a $300,000 loan.

That extra money can be used to pay off a home loan faster, or quickly help to knock down unwanted credit card debt.

Don’t fix your rates yet

With banks and credit unions offering fixed rates home loans as low as 5.62% for 3 years the banks must be predicting further rate falls.

The big banks are predicting a record profit for next financial year. They don’t make these profits by offering investors a fixed rate that they lose money on!

Time to consider your next property purchase

When rates drop, consumer confidence bounces back. The property market has been in a slump, which has given buyers the upper hand in negotiations.

This makes it a great time to buy before people start to really clamour back into the market.

Interestingly, many experts are tipping the RBA to continue to drop rates over the remainder of 2012.

Time to start investing

Some investors had set up their budgets so that they were getting by with mortgage interest rates of 7-8%. If rates continue to drop those people will begin to see they really have some serious extra money to play with.

Having less to pay on holding costs puts investors in a great position to pay off other debts to consolidate their position before making their next investment.

Now is a great time to assess your position, and make some changes to put yourself in the best possible financial place for the remainder of 2012.




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