Could this low cash rate reduce the cost of your future mortgage?

Why does a steady cash rate mean you need a buyer’s agent?

In a decision on June 7, the Reserve Bank of Australia (RBA) decided to keep the official cash rate at the record-low of 1.75 per cent. This comes after a cut of 25 basis points last month, and the lowest cash rate on record in the country will be spurring people toward getting onto the property market more and more.

This is because as comparison rates drop – a result of banks having to pay less to borrow money from the RBA – there is the possibility of a great surge in mortgages being taken out. When low comparison rates are seen, it encourages buyers to become active in the property landscape, because of how much less a mortgage will end up costing them in the long-term. This is great news for sellers, as there will be a greater volume of serious bidders, but that's also potentially bad news for fellow buyers.

When lots of people are on the prowl, it can make your perfect property that much more difficult to secure. Competition will heat up and a bigger fish can swoop in at the last minute to snatch the closing bid from your mouth!

Don't let the biggest fish on the reef take away your dream for a new home.Don't let the biggest fish on the reef take away your dream for a new home.

Nobody wants that to happen, so taking steps to ensure you're on your own when bidding can really boost your chances of getting the best home for your needs. Does doubling your pool of available properties sound like it will help you? A buyer's agent from Cohen Handler can make that happen, with their great relationships, industry knowledge and experience, off-market properties become a reality.

Why does the cash rate affect this?

In a statement from Glenn Stevens, the RBA governor, global interest rates have remained low for some time now, and it's encouraging growth around the world. This is keeping inflation to a minimum, and "low cost pressures" from elsewhere mean the cash rate can remain minimal itself.

"Super low interest rates only get us so far."

However, the Housing Industry Association (HIA) believes that more needs to be done to help Australians fully stabilise and find themselves in truly sound financial positions. If this happens, more buying will be seen, making the landscape even less accessible to the average buyer.

"Super low interest rates only get us so far," said HIA Chief Economist Dr Harley Dale.

"Appropriate fiscal policy, together with economic reform that has housing as a core focus, is necessary to lock in decent growth in productivity and living standards for current and future generations of Australians. We live in a very fluid economic environment so it is appropriate that the RBA is willing to cut rates further this year, should it deem that necessary. It is quite clear that the bank is leaving the door wide open."

Comparison site finder.com.au also notes that while the cash rate is this low, and banks don't have to pay as much to borrow money for mortgages, comparison rates could drop. When this becomes widespread, savers with enough for a deposit are going to jump at the opportunity to buy property.

The largest comparison rate drop that finder.com.au reported was from 3.6 per cent to 3.4 per cent, while other savings accounts had an increase of 25 basis points, in line with the same drop to the cash rate. Not having to pay as much for mortgage repayments in the long run means a mortgage might not be hanging over people's heads for as long, or the monthly repayments won't hurt the pocket as much. A welcome boost to a savings account can go a long way, too.

This can only be good news, right? Not necessarily if you're an inexperienced buyer.

Getting to the top of the pack

With so many people trying to get into the same type of properties as you, someone with more to spend will be able to outbid you, either at auction or in a private treaty bidding war, and you'll just keep missing out.

To stop this from happening, a buyer's agent can bid, negotiate, settle and secure a home on your behalf. They can also present a plethora of off-market homes to you for viewing and – without competition – buying. This will prove invaluable, as there won't be any bids sneaking in at the last minute to take your home away, because in most cases of off-market purchases, nobody else is aware of the negotiation.

Keep your off-market prospects to yourself and you'll find that securing them is a breeze.Keep your off-market prospects to yourself and you'll find that securing them is a breeze.

That allows you to choose a home that you like the look of, view it, make a bid (with the advice of a buyer's agent) and eventually sign the contract of sale. And that's the end-game for all buyers, so why wouldn't you allow yourself the cutting edge going into your property search? A buyer's agent will charge between 1.5 and 3 per cent for a their services, but they could save you a whole lot more money than that over time.

Does a buyer's agent sound like a great idea to give you that boost and secure your home in what's going to be a competitive landscape? Contact Cohen Handler today.

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