This week’s tip is about home loan interest rates in Australia. I know there has been a lot of media hype about interest rates and a lot of scare tactics and misinformation about what’s happening in the market.
People are concerned about how interest rates are actually going to affect property prices. Of course, it’s just estimated because no one knows what’s actually going to happen to property prices and interest rates.
What I do know from previous experience of buying and owning real estate is even when there have been periods of interest rate rises, property prices have still increased in value.
I remember buying my first property, where interest rates were at 20% in New Zealand. But over that time, the property prices increased.
In more recent times in Australia, around the 2010 period, when interest rates were on the rise, property prices in Australia were still rising quite sharply.
We are also protected in Australia by the bank interest rates. When they work out our borrowing capacity and our affordability, they are factoring in about 2.5% to 3% higher than what we are actually paying in interest rates.
I would recommend that you speak to your broker and don’t rely on information from the media. Discuss if you should lock in your interest rate now, do you need to restructure your loan? Everyone’s situation is different. Have a look at what five-year fixed rate the banks are offering and if this is something you should be considering.
Will an increase in home loan interest rates in Australia affect the property market?
How will these interest rate rises affect the property market? From previous market cycles, prices have been more affected by supply and demand rather than interest rate rises. Locations like Brisbane and Adelaide are continuing to see values increase as their population is rising.
The other factor is many won’t be affected by rate rises as one-third of properties don’t have a mortgage and another third are owned by investors that are seeing rental income on the rise.
When you are doing your cash flow forecasts for your investment property always have a higher interest rate than you’re currently paying.
If you have any questions or would like to discuss purchasing a property please feel free to book a time in my calendar by clicking here.
Regards,
Geoff Tomkins
Buyers Advocate
PH: 0404 852 781
