Mortgage holders will welcome today’s interest rate cut - provided their lender passes it on of course - however given the subdued activity across the broader economy, the RBA’s latest move reinforces the need for caution, said Laing+Simmons Managing Director Leanne Pilkington.

Ms Pilkington said the current climate requires a measured approach by consumers when it comes to property decisions, whether they are home owners, mortgagees, investors or renters.

“For the real estate market, today’s interest rate cut supports a continuation of the relative stability we’ve experienced so far this year. Rates were already very low and the balance of power between buyers and vendors has levelled,” Ms Pilkington said.

“For those in a secure position to buy, another cut is a good opportunity to begin their mortgage journey at the bottom of the rate cycle. For vendors, demand remains robust for properly price properties. Today’s decision supports the status quo,” she said.

Nevertheless at times like this, Ms Pilkington said, people should take the opportunity to have a closer look at their budgets and streamline their expenses.

“Rather than be ruled by fear, now is the time for people to take stock and put in place sound platforms for their future. It might mean shopping around for a cheaper interest rate, consolidating their debts, actually increasing their mortgage repayments if there is scope to do so, and looking at other ways to trim the fat, so to speak,” Ms Pilkington said.

“For those serious about entering the market, their focus should be on growing their savings and taking the necessary steps to maximise their borrowing capacity.”

She pointed to a number of practical measures would-be first home buyers could investigate.

“To increase your borrowing capacity you could review your credit card limits, as these impact on your ability to obtain housing finance. Banks typically apply 3% of the credit card limit as a monthly expense, even if you pay each bill on time,” Ms Pilkington said.

“You could also consider cancelling cards if you have more than one, or reducing unnecessary limits, to boost your borrowing power. Being able to document a sensible approach to using credit makes a difference when you sit down with a lender.

“So does the ability to document a genuine attempt to save. 

“Every lender will have a perspective on what it classifies as genuine savings but generally speaking, savings should be held or accumulated over a three month period or more, while shares held and rental history over a three month period is also used as a guide,” Ms Pilkington said.

Read more:

Rate cut receives broad support