The Reserve bank of Australia (RBA) has cut the official cash rate by 25 basis points to a new record low of 0.50% as the Coronavirus outbreak impacts global financial markets.

RBA Governor Philip Lowe said the Coronavirus has clouded the near-term outlook for the global economy and global growth in the first half of 2020 will be lower than earlier expected.

Australians have always had a regrettable relationship with the big 4 banks. Rarely do I hear consumers raving about the ‘amazing’ experience they had at their local branch or how ‘fairly’ they’ve been treated when looking at recent fees and charges on their account!

However, the realty is around 80% of us bank with the big 4 and as we’ve seen with the Royal Commission, they’re essentially too big to fail.

This week I had two meetings with clients, which each brought up a scenario that I am seeing again and again in my travels as a mortgage broker. I thought in this article that I would unpack each of these scenarios and give you the recommendations I provided for each of my clients to consider.

The first scenario was a couple who bought their family home about 10 years ago, have been chipping away at their mortgage, built up a good chunk of equity and wanted to know what would be the better move – to continue paying down their home loan or to use some of their equity and purchase an investment property.

For the longest time I haven’t paid much attention to interest rates as we’ve had something like 20 months in a row of the RBA doing nothing to the cash rate. However the last two months have put the market into a spin.

Not only is the cash rate now the lowest it’s ever been at 1%, we’ve also had APRA remove their restrictions on investment and interest only lending, not to mention favourable changes to the way in which banks assess someone’s income.

Yesterday the RBA reduced the cash rate for the 2nd month in a row, making the new rate 1%, the lowest we’ve seen in recorded history.

Since the announcement yesterday, many lenders have been quick to pass on the full rate reduction and it’s expected that the majority of lenders will be close to passing on the full rate reduction within the next few weeks.

Two weeks ago the regulator of the finance industry (APRA) recommended changes to the current way in which lenders assess serviceability (you’re ability to pay down a loan). For our little industry, it’s big news and one that in my opinion could be big enough to spark property markets or at the very least, allow us to reach a true bottom of the market.

Recapping, the current system in place is that lenders must presume interest rates are at least 7.25% and borrowers income needs to be high enough to be able to comfortably service the home loan repayments after all other liabilities and living expenses have been considered.

Right now is a great time to be purchasing commercial real estate. With residential property markets in Sydney and Melbourne flailing, investors are looking to commercial as an alternative investment option. Not only are the yields significantly higher in commercial, the asset class has been growing at the same time residential has been diving.

But it’s not just investors getting into commercial real estate. So too are business owners who are looking at the rent they’re paying and are thinking, “Why don’t I just buy an office if my loan repayments are going to be virtually the same as my rent?”

It’s a tough gig to be self-employed.

I know from the outside in people think it would be amazing to choose your own hours, deal with who you want and have control on where you want to take your business strategically. But the reality for most business owners is that money is tough for a long time, you end up working way more hours than when you were employed and you’ve still got to interact with people you don’t want to deal with.

I caught up with my parents last week, who are based in the Hornsby area – shout out to the Asquith Magpies! Talking to them about the residential property market, it was interesting to hear their opinions about of how significantly things have dropped in the area over the past 12 months. Dad reckons it’s been about a 30% dip.

I find it really interesting to compare this against the lower North Shore commercial property market, where I see a lot of transactions as my office is based in North Sydney. Availability is low, rents are significant and values seem to be holding strong, if not increasing.

With the Sydney market cooling over the last few months, it seems that entry level prices are now at levels where first home buyers are once again interested in entering the market. Latest data from the ABS has revealed that first home buyers now make up 18.3% of the mortgage market, which is the highest level since 2012.

At Multipart Finance, we’re seeing similar results and are dealing with the most first home buyers we’ve ever seen.