Interest rates are reported to have fallen for the first time in 7 years. This 0.25% fall is great news for those of you in debt with loans, credit cards or home loans. This is because the rate at which you pay in interest to borrow the money has gone down.
It is also welcomed by the retail market, who are known to benefit the most from falling rates as consumers have more money to spend, so this should reflect on sale prices making spenders happy too. Another sector to benefit is the sharemarket as they tend to borrow money, so as the rates fall so does their borrowing expense.
This fall on the other hand does not come as good news to savers, as the interest they could have earned has declined, making other investment opportunities look more attractive.
The interest cash rate is the rate that banks charge each other for personal loans. The reserve bank rate is used to manage the economy. Interest rates change depending on the state of the economy, dropping when the economy is doing badly. This allows money to be made more freely available and helps to stimulate the growth of the economy.
When interest rates go up, borrowing becomes less attractive so the demand falls. The Reserve Bank usually increases interest rates to counteract a rise in inflation.
When interest rates fall, investors buying into the Australian Dollar get less for their money. This can have bad implications on the Aussie Dollar, as people will go elsewhere to spend their money, resulting in a fall in the currencies value. In this situation it may be worth taking advantage by investing your money abroad. This way you can make money on the currency movement and with any luck on your investment too.
Interest rates fall
