We are in absolutely unchartered waters, with the situation changing every hour.
The RBA has just announced an out-of-cycle emergency rate cut to help the Australian economy withstand the impact of COVID-19. The cash rate has been reduced to a new record low of 0.25%.
This is unprecedented to say the least, on a number of levels. First, this is the lowest the cash rate has ever been. Ever.
Second, even at the height of other significant global shocks such as the GFC or 9/11, the RBA didn’t cut the cash rate twice in a month.
The lower rate will obviously help people meet their mortgage repayments. I urge all mortgage holders to contact us to ensure you are getting the benefits of this rate cut – we’ll be closely monitoring the reaction of all lenders, so we’ll advise if we can save you money elsewhere.
Having said that, the rate drop wasn’t the real big news here. The RBA also announced a program to purchase Government bonds and a 3-year funding facility to support authorised deposit-taking institutions (ie banks and other lenders). This means a large amount of cash will be dumped into the economy, which is exactly what we need right now.
Beyond the rate cut, disruptions to our way of life could become the new normal, so we all need to be adaptable and resilient. Fortunately, we’re all in the same Diamond Princess (a crude boat metaphor showing that we’re all facing similar challenges and hurting in some way).
In a time of such significant financial pressure and uncertainty, the best advice I can give is: don’t freak out, but don’t stick your head in the sand either.
Will I lose my job? How can I maintain my mortgage repayments if I lose shifts? Will the banks put measures in place to help me if I get the sack, or if my business goes under, and I can’t maintain my repayments? And who needs that much toilet paper???
These are all great questions, with few definitive answers. If there’s one thing I urge you to do, it’s to keep the conversation going. Keep asking questions of your financial experts (that’s us) and keep asking after each other’s wellbeing.
I’m heartened that our clients are turning to us to ask these questions. We may not have all the answers right now, but there may be little things you can do that will make a huge difference to how you get through this financially.
Call us: (03) 9032 6700
The other advantages of calling us instead of your bank are:
- We’re able to respond sooner than your bank (and can usually get answers from your bank on your behalf quicker than you can because of our networks)
- We’ll give you a range of solutions (whereas in many cases, your bank’s hands will be tied about what they can do for you)
There are a range of left-field solutions that should be part of any discussion about your options. They all have pros and cons, but in these complex times we need to put everything on the table for consideration. These options include private funding (where you use equity to access extra funds quickly), debt consolidation, personal loans, and top-ups.
Another question we’re getting a lot is ‘What will happen to the property market?’ The reality is that nobody knows. Could there be a price dip? Possibly. One thing I do know is people will always need a place to live. And compared to the volatility of the share market, which is also in unchartered waters, property has many benefits. The biggest being it has a roof and walls.
We’re also mindful of the mental health challenges people will be going through. So we’re here for you, even if you just want to talk things through with someone who cares.