In the wake of the Reserve Bank of Australia's [RBA] latest interest rate cut, a local finance broker is encouraging potential borrowers to plan their loans carefully.
Last Tuesday, the RBA cut the interest rate to a historic low of 1 per cent, one month after the rate was cut from 1.5 to 1.25 per cent.
The back-to-back cuts are the first in seven years, with the RBA stating a slowing economy and rising unemployment as key reasons behind the successive cuts.
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Access All Loans finance broker Greg Sly said potential borrowers could benefit from the latest cuts if they adopt a sensible approach towards taking out a loan.
"While the interest rate is the lowest it has been in a long time, the assessment rate most banks use to assess mortgage customers is still 7.25 per cent," Mr Sly said.
"However, the Australian Prudential Regulatory Authority [APRA] has introduced a new rule to allow banks to set their own assessment buffers, which will open up possibilities for borrowers."
While the rate cut is set to provide more opportunities for borrowers, Mr Sly said the result could cause difficulties for those relying on income from interest.
"We need to spare a thought for self-funded retirees living off their investments," he said.
"It's a tight position, but the back-to-back cuts indicate that the federal government is trying to stimulate the economy."
"There's always two sides to the story when discussing interest rate cuts."
Mr Sly said the low interest rate has generated record levels of inquiries at Access All Loans, particularly among potential home buyers.
"Home and land prices in Bathurst have been strong for many years, so people are seeing it as good investment," he said.
"With the rate so low, it's a good time for first home buyers to enter the market."
Mr Sly said it's important to keep the local economy in mind when considering taking out a loan.
"If we continue to shop locally and support our businesses, the revenue will stay in Bathurst and allow the economy to grow into the future," he said.