The interest rate cut with Ross Greenwood

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:00):
Something like twelve increases money.

Speaker 2 (00:01):
There handed down an interest rate cut yesterday and joining
us is Sky News business edator Ross Greenwood.

Speaker 3 (00:08):
Morning. How are you going?

Speaker 1 (00:09):
Good morning, Ross?

Speaker 3 (00:10):
How are you very very well?

Speaker 4 (00:11):
Thank you?

Speaker 3 (00:12):
Everything? Okay?

Speaker 1 (00:13):
Interest rate cut couldn't be better?

Speaker 3 (00:16):
Whoa a fuck? You don't want it?

Speaker 5 (00:18):
Will it will make?

Speaker 3 (00:20):
Now?

Speaker 1 (00:21):
Can you explain it to everyone? What is the interest
rate cut? What's it mean?

Speaker 4 (00:25):
What it means is effectively the economy is normalizing after COVID.

Speaker 3 (00:29):
That's the reality. It's now really.

Speaker 4 (00:31):
Come back to. Inflation is backing inside the boundary. Now
that doesn't mean your supermarket's getting cheaper. Basically priced are
still going up, but they're just going up.

Speaker 3 (00:41):
Much more slowly than what they were. So from that
point of view, the economy is normalized.

Speaker 4 (00:47):
It really had a big shock during COVID, A lot
of money you're spent by government.

Speaker 3 (00:51):
Then all of a sudden, you know, sort of the
economy took off.

Speaker 4 (00:54):
Because it took off, interest rates had to go up
to basically quash the inflation. That's happened now the inflation
basically has come down, not prices. Inflation has come down,
so price is not rising by as much and so
as a result, the Reserve Bank is now are more
constant to be able to cut interstrates, and while the

(01:15):
inflation remains relatively benign, it will continue to cut interstrates.
And so you know, right now this interstrate cut again
puts some money in people's pockets.

Speaker 3 (01:26):
It's if they want it. But there's more coming.

Speaker 4 (01:28):
There's likely to be another interst rate cut in August,
and then probably the markets are saying there'll be another
one in December this year. So so long as everything
stays as it is and doesn't change, then it's likely
you've got a couple more interest rate cuts coming later
on this year as well.

Speaker 5 (01:44):
Fixed loans, If anyone's on a fixed loan at the moment,
is it a good idea for them to start negotiating
a new mortgage or maybe fixing in or as you
just said, if it's predicted to go down a couple
of other times, maybe they just sit and wait.

Speaker 3 (01:57):
Nope, sit and wait.

Speaker 4 (01:57):
Because the penalties forgetting out of the fixed mortgage are
too tough.

Speaker 3 (02:02):
So you don't even bother. You made a choice. You
made that decision. If you've got it wrong, well you
don't have to.

Speaker 4 (02:08):
Wear the consequences to get out to try and go
is going to be too expensive for you to do it,
and effectively you might as well just sit tight and
wait until the end of your fixed rate comes and
then renego. Shout out for that for those people on
variable mortgages. There's an interesting thing else spotted yesterday the
Commonwealth Bank, Australia's biggest home lender, basically said after the

(02:29):
February rate cup this year, it said that people have
got a choice because if you want to actually get
the money, which is if you've got a half million
dollar loan basically eighty bucks of eighty bucks a month,
then what you've got to do is that you actually
have to go to your bank and say, hey, can

(02:49):
you please make certain I get that money right now?

Speaker 3 (02:53):
Normally this is in.

Speaker 4 (02:54):
Most banks in Australia. They will simply keep your payments
exactly the same, but the extra money goes to pay
down your mortgage.

Speaker 3 (03:03):
So, in other words, you.

Speaker 4 (03:05):
Don't see the benefit in cash terms of the rate cut.
So you sit there and think, well, because the cost
of living crisis too of people doing it tough, surely
lots and lots of people would have brown their bank
and basically got the rate cut, and the answer is
only fourteen percent of people did.

Speaker 3 (03:23):
Eighty six percent of people.

Speaker 4 (03:25):
Didn't even bother changing their payments as a result of
the February rate cut, and most likely that's what will
happen this time.

Speaker 3 (03:33):
So just a small tip.

Speaker 4 (03:34):
If you're really sure to cash and you need a hand,
I'm not sure people who are in this situation have
probably done it. Then you've got to ring your bank
and say, hey, I actually want those payments to come down,
because otherwise they'll make you pay down your mortgage more quickly.

Speaker 3 (03:49):
And for a lot of people that suits them as well.

Speaker 4 (03:51):
For the majority of people, eighty six percent of people
didn't change their payments as a result of the February
rate cut.

Speaker 2 (03:58):
And is it too early yet for these two cuts
to have an effect on the housing market at all?

Speaker 4 (04:04):
No, no, no, it's probably pretty solid and the housing
markets eventually start to pick up. What you kind of
hope is maybe a few developers out there start to
get a bit of confidence that they can start to build,
because that also will help the housing markets a lot.
The real problem of housing Australia is a lack of supply,

(04:24):
and the reason there's a lack of supplies because housing
developers can't make any money building houses right now. And
as a result, even though the government's got this lofty
aspirations to build one point two million homes by the
end of the decade the next five years or so
four and a half years, they're way behind on that target.
And the reason they're way behind that target is because

(04:45):
private builders aren't building because they can't make any money now.
As the cost of money comes down and there's more
interest to buy, either at that squeezes prices higher or
indeed the profit motive for somebody to build a house
becomes greater. So from that point of view, there may
be just a few more homes built, more homes of
the build. Of course, that means the likelihood is that

(05:06):
there's more supply so priced we might even start to
moderate long term off the back of that as well.

Speaker 1 (05:12):
Ross Greenwood, always a pleasure, Thank you so much.

Speaker 3 (05:14):
I had good to break today.

Speaker 1 (05:16):
We love that, right, we love it. Thank you so much.
Business editor for Sky News, Ross Greenwood