FEAR & GREED | Business News Ask Fear & Greed: Who loses when rates are cut?
May 20, 2025
Interest rate cuts can create a ripple effect across the economy. Homeowners might celebrate lower payments, but retirees on fixed incomes could face challenges. First-time buyers may find the market more accessible, while banks navigate their own set of pressures. The podcast dives into the nuanced impacts on fixed-rate mortgage holders and property firms, revealing the complex trade-offs that come with every financial shift. It’s a deep exploration of who wins and who loses when rates are adjusted.
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Term Deposit Holders Lose Out
- Interest rate cuts mainly harm term deposit holders by lowering returns on new and reinvested deposits.
- Retirees and older people relying on safer assets like term deposits and bonds are often the biggest losers from rate cuts.
First-Time Buyers Face Competition
- First-time home buyers may lose from rate cuts as investors jump into the housing market seeking better returns.
- Increased competition from investors drives up prices, making it harder for first-time buyers to enter.
Sean's Mortgage Rate Strategy
- Sean Aylmer shares his mortgage strategy: 50% variable rate and 50% fixed rate.
- This blend helps spread risk, as fixed rates can lose value if floating rates drop below them due to cuts.