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Michael Thompson: Welcome to Ask Fear and Greed, where we answer questions

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Michael Thompson: about business, investing, economics, politics and more. I'm Michael Thompson

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Michael Thompson: and hello Sean Aylmer.

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Sean Aylmer: Hello Michael.

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Michael Thompson: Sean. Today is a very very very topical question because

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Michael Thompson: with the Reserve Bank Board set to announce its interest

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Michael Thompson: rate decision this afternoon, curious if interest rates are cut

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Michael Thompson: in any kind of given circumstances. Doesn't need to be today,

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Michael Thompson: it could be kind of any occasion when the Reserve

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Michael Thompson: Bank Board meets. We all know that mortgage holders are

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Michael Thompson: really some of the big winners. But who are the losers?

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Sean Aylmer: The losers, the less fortunate.

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Michael Thompson: Yeah, the second place skeeters, the.

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Sean Aylmer: Second place getters. The people who put money in term

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Sean Aylmer: deposits definitely top that list. Okay, we know we found

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Sean Aylmer: out in the last couple of weeks at the value

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Sean Aylmer: of term deposits in Australia at a ten year high.

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Sean Aylmer: Now the funds already invested affected, But anyone taking on

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Sean Aylmer: a assuming the Reserve Bank cuts interest rates today, anyone

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Sean Aylmer: taking a new term deposit out tomorrow probably will be affected.

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Sean Aylmer: Also in those term deposits that are there now roll off,

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Sean Aylmer: They've got to reinvest the money, or most people will

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Sean Aylmer: reinvest the money and that might be as good. So

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Sean Aylmer: people with term deposits are losers, less winners. Let's call them.

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Sean Aylmer: Within that, there is a lot of pensioners. Well, actually

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Sean Aylmer: there's a lot of retirees. Is more accurately, because older

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Sean Aylmer: people tend to have their retirement savings in safer assets,

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Sean Aylmer: so they have them in term deposits, in bonds, less inequities,

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Sean Aylmer: less in private capital, all that sort of stuff. So

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Sean Aylmer: often it's retirees that lose out from lower interest rates.

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Sean Aylmer: First time buyers they can also lose out because if

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Sean Aylmer: you have lower interest rates and you have all these

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Sean Aylmer: investors thinking, oh, rate it down, I'll get a better

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Sean Aylmer: return on housing, I better jump in. That's not real

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Sean Aylmer: good for first time buyers because they can heating with investors.

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Sean Aylmer: Price is a bit up. So often a loser from

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Sean Aylmer: a lower mortgage rate is the first home buyer. Also, Michael,

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Sean Aylmer: do you have a fixed rate home loan?

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Michael Thompson: I do not, right, variable all the way.

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Sean Aylmer: Variable all the way. So I have a I'm fifty

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Sean Aylmer: to fifty variable fifty percent fixed because I was always

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Sean Aylmer: going to be half right and half wrong and and

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Sean Aylmer: spreading in my risk diversification.

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Michael Thompson: This is good.

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Sean Aylmer: So I'm still winning on my fixed rate, to be honest,

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Sean Aylmer: but I'm not winning quite as much. So some people

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Sean Aylmer: will have taken out a fixed rate potentially in the

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Sean Aylmer: last little bit, and the reduction in interest rates means

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Sean Aylmer: that a floating rate might actually fall below that fixed rate,

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Sean Aylmer: So people who have taken a fixed rate loan could lose.

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Sean Aylmer: Finding out quite a few losers here, right, I mean, and.

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Michael Thompson: There's a lot of people sharing the silver meta.

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Sean Aylmer: There's a lot of silver. The banks also, so they

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Sean Aylmer: tend to lose out from lower rates because lower levels

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Sean Aylmer: of term deposits means their cost of funding. Isn't it good?

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Sean Aylmer: Now it gets more complicated with banks. There's so much

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Sean Aylmer: going on in that. But theoretically banks lose out as well.

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Michael Thompson: So what have we got.

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Sean Aylmer: We've got term deposit people yep, including retire retirees yep.

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Sean Aylmer: We have first time buyers yep.

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Michael Thompson: We have banks, yep. We've got anyone with a fixed

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Michael Thompson: rate mortgage that potentially.

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Sean Aylmer: Six strate mortgage. There's also secondary effects, so these are

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Sean Aylmer: the people that sort of immediately happen, But then there'd

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Sean Aylmer: be in investment markets people who would lose out because

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Sean Aylmer: they've taken a punt on rates staying the same or

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Sean Aylmer: going higher for example. I mean, this does get complicated.

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Sean Aylmer: There'd be certain companies where earnings benefit from so property

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Sean Aylmer: companies always have a lot of debt. Lower interest rates

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Sean Aylmer: should help property companies with me so far, yep, people

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Sean Aylmer: are investing, they've got an option between a property company

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Sean Aylmer: and someone else. They might take it from me somewhere

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Sean Aylmer: else and put in the property company because interest rates

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Sean Aylmer: are falling, So the somebody else loss out becomes a

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Sean Aylmer: silver medallist, it becomes a silver medallist. That's it. So

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Sean Aylmer: there's lots of secondary effects like that as well.

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Michael Thompson: Do you like the way even as you're talking, I'm taking.

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Sean Aylmer: Notes are taking I was impressed by that, as though.

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Michael Thompson: There's going to be a test at the end, and

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Michael Thompson: I can now take these home and study up so

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Michael Thompson: that i'll ace my test. Maybe that's the way that

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Michael Thompson: we can we can start testing how much attention I've

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Michael Thompson: been paying. Is that the next episode of ours, Fear

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Michael Thompson: and Greed, begins with the test on the previously I like, yeah,

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Michael Thompson: I don't know why I suggest that. That sounds like

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Michael Thompson: an absolute nightmare, both for me and for listeners. Anyway,

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Michael Thompson: sure I think we've answered that one. Look, you know what,

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Michael Thompson: I'm going to be immodest and say admirably.

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Sean Aylmer: Admirble, gold medal, gold medal answer.

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Michael Thompson: Indeed, all right, good stuff. Thank you for answering that one. Sean,

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Michael Thompson: Thanks Michael. And remember, if you've got your own question

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Michael Thompson: that you would like us to answer them, please send

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Michael Thompson: it on through via the website Fearangreed dot com dot au.

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Michael Thompson: You can jump onto any of the social media platforms Facebook, LinkedIn, Instagram.

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Michael Thompson: Sent us a question through there and we will pop

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Michael Thompson: it on the list. We will answer pretty much anything.

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Michael Thompson: I'm Michael Thompson and that ask Fear and Greed