03 Mar Record low interest rates. Great for mortgages, but what about your super?
Record low interest rates. Great for mortgages, but what about your super?
When interest rates are low, house prices tend to rise since home-buyers get a boost of confidence from lower mortgage rates, and that pushes demand for home ownership.
Interest rates in Australia are at a record low but will property and superannuation thrive?
The Reserve Bank of Australia (RBA) has cut the official cash rate from 2.50 to 2.25% in February 2015 and then in May by a further 25 basis points leaving the cash rate at a record 2.00% , citing weak economic growth, low inflation and a higher rate of unemployment.
However, less growth in the economy is not always bad news. Property and superannuation, for instance, may thrive.
When interest rates are low, house prices tend to rise since home-buyers get a boost of confidence from lower mortgage rates, and that pushes demand for homeownership. In his statement announcing the rate cut, the governor of the RBA, Glenn Stevens, said credit growth had picked up to moderate rates in 2014, with stronger growth in lending to investors in housing assets. He added that the Bank is working with other regulators to assess and contain economic risks that may arise from the housing market.
So if youâ€™re thinking of down-sizing, your house may fetch a higher price if you decide to sell.
A lower interest rate can also lead to greater investment in the share market as more people search for a better yield in shares. This, in turn, can have a positive impact on many super funds. Asset values can increase since many savers may be prompted to include more assets with higher expected returns in their portfolios.
Speak to a financial adviser who can help you decide how best to invest your super, depending on such matters as the amount of time you have before you retire, whether you still have dependent children and the level of risk youâ€™re comfortable with. After all, it’s your Super and your future, so don’t just sit back and let it happen. Talk to us today to set up a super strategy that puts you in control of achieving the retirement lifestyle you crave.
Source: Colonial First State