Record Low Rates Good for Borrowers but Very Bad for Savers
The RBA’s move to cut the official benchmark to 0.1% is almost certain to fuel concerns over-inflating a property market that for the last thirty years has been one temperature, hot!
For borrowers, the interest rate cut will free up more cash to pay down loans faster or, as the policy makers are hoping, boost spending in the economy.
The flip-side of course is that saving money is almost pointless and keeping cash in a safe buried in the backyard will provide a similar return to keeping money in the bank.
The return on $100,000 is now $100 annually or $1.92 per week meaning the stock market will be the last bastion of where people can chase returns.
Sadly, recent history through the Banking Royal Commission showed what can happen when easy credits meets the unsophisticated investor. As they say in the classics, buyer beware.