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Tuesday, 4 November 2008

Economic cloud has a silver lining

I'm glad to receive any good financial news these days, so the Reserve Bank of Australia's larger-than-expected rate cut (0.75%) today was indeed welcome. The RBA has now made three consecutive rate cuts, of 0.25%, 1.00% and 0.75% - slashing the official interest rate by 28% from 7.25% to 5.25%. Although the tax-deductible mortgage interest for our investment property is at a fixed rate, our home loan is the standard (for Australia) 25-year variable rate loan. With our home loan balance still almost $500,000 the recent rate cuts will reduce the annual interest expense by around $10,000 pa. Since the interest on our home loan isn't tax deductible, this is equivalent to DW and I earning an extra $15,000 pa or thereabouts.

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