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How Much Do Rate Cuts Affect Borrowing Power
Welcome back to another episode of Talk Property To Me! I'm your host, Brad East, alongside my co-host, Aaron Downie. In today's episode, we dive deep into the impact of recent RBA rate cuts on your borrowing capacity and mortgage repayments.
We kick things off by discussing the common sentiment we've heard from potential buyers: "I'm going to wait for rates to go down before I make a purchase." We aim to break down this mindset and illustrate the opportunity cost of waiting in the current market. To provide context, we present a simple case study featuring a couple with no children, each earning $80,000 annually.
Using a Big 4 lender as our example, we analyze how a recent rate cut from 6.18% to 5.93% increased their borrowing capacity by $17,000, bringing it to $799,000. While this is a positive change, we highlight that property values have been rising, with a typical Newcastle property increasing by 5% this year alone. This means that waiting for a rate reduction could actually cost buyers more in the long run, as property prices continue to climb.
We also speculate on the potential for another rate cut, which could further increase borrowing capacity to $820,000. However, we emphasize that many homeowners may not even be aware of their current interest rates, with over 41% of Australians not knowing what they are paying. We challenge our listeners to check their rates and consider the significant savings that could be achieved by refinancing.
Throughout the episode, we stress the importance of acting promptly in the property market. We discuss the compounding effect of property investment and how waiting for the "perfect" moment can lead to missed opportunities. We encourage listeners to adapt to the current market conditions and make informed decisions based on their borrowing capacity.
As we wrap up, we provide insights into how rate reductions affect mortgage repayments, illustrating the savings across various loan sizes. We also share tips on how to negotiate better rates with banks and the importance of not being loyal to lenders who may not have your best interests at heart.
Join us as we unpack these critical topics and empower you to take control of your property journey. Don't forget to reach out to us on social media with your questions or comments—we're here to help! Thank you for tuning in, and we look forward to seeing you in the next episode!
- 00:00:00 - Introduction to RBA Rate Cuts and Borrowing Capacity
- 00:00:13 - Opportunity Cost of Waiting to Buy
- 00:00:34 - Case Study: Borrowing Capacity of a Couple
- 00:01:23 - Impact of Rate Cuts on Borrowing Capacity
- 00:02:35 - Market Growth vs. Increased Borrowing Capacity
- 00:03:38 - The Importance of Knowing Your Interest Rate
- 00:04:46 - The Cost of Waiting to Buy Property
- 00:06:48 - Adapting to the Current Market Conditions
- 00:08:08 - Understanding Compounding in Property Investment
- 00:09:14 - Investing for the Long Term
- 00:10:16 - Avoiding Ego-Driven Investments
- 00:10:27 - Effects of Rate Reductions on Loan Repayments
- 00:11:07 - Savings from Rate Reductions Explained
- 00:12:20 - The Importance of Knowing Your Current Rate
- 00:13:07 - Negotiating with Your Bank for Better Rates
- 00:14:01 - Understanding Bank Loyalty and Discounts
- 00:15:02 - The Role of Algorithms in Bank Rate Adjustments
- 00:16:18 - Avoiding Loyalty to Banks
- 00:17:17 - Conclusion and Call to Action
ABOUT THE HOSTS
BRAD EAST
Brad East is the Managing Director of Wisebuy Home Loans. Brad is an award-winning mortgage broker and has helped thousands of clients gain finance to purchase properties. Wisebuy Home Loans is the go-to mortgage brokerage for clients wanting out-of-the-box applications approved.
Website → https://wisebuygroup.com.au
LinkedIn → https://www.linkedin.com/in/newcastlemortgagebroker/
Instagram → https://www.instagram.com/bradeast_mortgagebroker/
Facebook → https://www.facebook.com/bradeastofficial
AARON DOWNIE
Joining the podcast in 2024, Aaron Downie is a seasoned property investor and director of Mackenzie Buyers Agency. Aaron’s deep understanding of the property market and investment strategies provides listeners with invaluable insights.
Website: https://www.mackenziepropertygroup.com.au/
Linkedin: https://www.linkedin.com/in/aaron-downie-1b2749134/
View all episodes
By Brad East & Aaron DownieWelcome back to another episode of Talk Property To Me! I'm your host, Brad East, alongside my co-host, Aaron Downie. In today's episode, we dive deep into the impact of recent RBA rate cuts on your borrowing capacity and mortgage repayments.
We kick things off by discussing the common sentiment we've heard from potential buyers: "I'm going to wait for rates to go down before I make a purchase." We aim to break down this mindset and illustrate the opportunity cost of waiting in the current market. To provide context, we present a simple case study featuring a couple with no children, each earning $80,000 annually.
Using a Big 4 lender as our example, we analyze how a recent rate cut from 6.18% to 5.93% increased their borrowing capacity by $17,000, bringing it to $799,000. While this is a positive change, we highlight that property values have been rising, with a typical Newcastle property increasing by 5% this year alone. This means that waiting for a rate reduction could actually cost buyers more in the long run, as property prices continue to climb.
We also speculate on the potential for another rate cut, which could further increase borrowing capacity to $820,000. However, we emphasize that many homeowners may not even be aware of their current interest rates, with over 41% of Australians not knowing what they are paying. We challenge our listeners to check their rates and consider the significant savings that could be achieved by refinancing.
Throughout the episode, we stress the importance of acting promptly in the property market. We discuss the compounding effect of property investment and how waiting for the "perfect" moment can lead to missed opportunities. We encourage listeners to adapt to the current market conditions and make informed decisions based on their borrowing capacity.
As we wrap up, we provide insights into how rate reductions affect mortgage repayments, illustrating the savings across various loan sizes. We also share tips on how to negotiate better rates with banks and the importance of not being loyal to lenders who may not have your best interests at heart.
Join us as we unpack these critical topics and empower you to take control of your property journey. Don't forget to reach out to us on social media with your questions or comments—we're here to help! Thank you for tuning in, and we look forward to seeing you in the next episode!
- 00:00:00 - Introduction to RBA Rate Cuts and Borrowing Capacity
- 00:00:13 - Opportunity Cost of Waiting to Buy
- 00:00:34 - Case Study: Borrowing Capacity of a Couple
- 00:01:23 - Impact of Rate Cuts on Borrowing Capacity
- 00:02:35 - Market Growth vs. Increased Borrowing Capacity
- 00:03:38 - The Importance of Knowing Your Interest Rate
- 00:04:46 - The Cost of Waiting to Buy Property
- 00:06:48 - Adapting to the Current Market Conditions
- 00:08:08 - Understanding Compounding in Property Investment
- 00:09:14 - Investing for the Long Term
- 00:10:16 - Avoiding Ego-Driven Investments
- 00:10:27 - Effects of Rate Reductions on Loan Repayments
- 00:11:07 - Savings from Rate Reductions Explained
- 00:12:20 - The Importance of Knowing Your Current Rate
- 00:13:07 - Negotiating with Your Bank for Better Rates
- 00:14:01 - Understanding Bank Loyalty and Discounts
- 00:15:02 - The Role of Algorithms in Bank Rate Adjustments
- 00:16:18 - Avoiding Loyalty to Banks
- 00:17:17 - Conclusion and Call to Action
ABOUT THE HOSTS
BRAD EAST
Brad East is the Managing Director of Wisebuy Home Loans. Brad is an award-winning mortgage broker and has helped thousands of clients gain finance to purchase properties. Wisebuy Home Loans is the go-to mortgage brokerage for clients wanting out-of-the-box applications approved.
Website → https://wisebuygroup.com.au
LinkedIn → https://www.linkedin.com/in/newcastlemortgagebroker/
Instagram → https://www.instagram.com/bradeast_mortgagebroker/
Facebook → https://www.facebook.com/bradeastofficial
AARON DOWNIE
Joining the podcast in 2024, Aaron Downie is a seasoned property investor and director of Mackenzie Buyers Agency. Aaron’s deep understanding of the property market and investment strategies provides listeners with invaluable insights.
Website: https://www.mackenziepropertygroup.com.au/
Linkedin: https://www.linkedin.com/in/aaron-downie-1b2749134/