Australia has seen unprecedented lows in interest rates over the last few years. This has a lot of benefits for property owners, buyers and investors, as well as sellers who are looking to get the maximum sale price for their home.
Take a look at why interest rates are so low, what’s going to happen next and how to leverage the current rates to your advantage.
Why are interest rates so low?
Interest rates reflect economic growth and stability.
When they are low, it’s because the Reserve Bank of Australia is attempting to help minimise household debt and encourage a steady inflation rate.
Thanks to current unemployment figures, fear caused by COVID and a number of other factors that impact our economy, the Reserve Bank has made the decision not to lift interest rates for some time. It has even gone so far as to say that low interest rates will last until at least 2024.
Anyone who works in property or finance will remind you that anything can happen when it comes to house prices and interest rates but this at least gives people a degree of confidence when planning for the short-term future.
Make low interest rates work for you
The consequence of low interest rates is higher property prices. With money being ‘cheaper’ to borrow, buyers can extend their budgets and afford to offer more when bidding for a new home.
If you are looking to sell your property, this is great news. So long as you have a presentable, good quality home in a sought after area, you should find the combination of low interest rates and drop in supply works in your favour.
Even if you are not looking to sell, there are other ways to use low rates to your advantage:
• Refinance: If you were already considering refinancing your current loan, now is definitely the right time. When you refinance to a lower interest rate you have the potential to reduce your mortgage bills by hundreds of dollars a month or even more.
• Make extra payments: The other option with refinancing is to reduce your rate but continue making the same mortgage payments. You can take advantage of low rates to cut years off the length of your home loan and build equity in your home sooner.
• Fix your interest rate: A fixed rate means you pay the same amount, even if official interest rates rise. You may wish to look into fixing all or part of your home loan for the next few years.
• Borrow: With interest rates so low, it is a good time to take out a loan. If your property could use some upgrades, borrow while money is cheap. You could add significant value to your property with much less to repay than you might have to in a few years time. Be aware that an interest rate rise is inevitable and always try to have room in your budget to accommodate this.
• Buy an investment property: It may seem counterproductive with property prices so high, but repayments are low and the demand for rental properties is strong in many areas. Do some research to figure out the best place to purchase an investment so you can take advantage of current low rates.
