(03) 9020 2905Something to cheer about? “Yeah, yeah!” There would really be something to celebrate if the bastard banks had passed on the cuts in full.
No generation has more to gain from lower rates than Gen X. To generalise, our generation is geared to the gizzards. (It’s Aunty Kerrin’s retirees who are going to suffer.)
Monster mortgages, car loans, credit card splurges, geared investments, excessive rugrat-related outgoings … we’ve got it all going on and a negative bank balance to prove it.
Falling interest rates are similarly a win-lose situation for us. Short-term, the minimum repayments on our huge debts reduce. Medium term, the Reserve Bank dropping rates is a sign that they’re worried about a worsening economy, which could mean our jobs are uncertain.
So, whaddya do? Prepare for the worst, hope for the best.
If you’ve got any “dumb” debt in the household (credit cards, furniture loans, etc), use the rate cut savings to pay them down faster. This is the debt you know you shouldn’t have anyway, so this is a gift opportunity to get rid of them.
Don’t reduce your repayments on your home loan. If anything, lift repayments to get further ahead – build a buffer in your offset/redraw accounts. You can access it later if necessary.
Whatever you do, don’t use this as your excuse to borrow more like we did in 2008. The last time the RBA slashed rates, we declared “party time” and borrowed until our noses bled. A year later, when rates started rising, we started complaining of debt hangovers and someone having spiked our bank balances.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and principal adviser with Castellan Financial Consulting.