Australia’s official interest rate is now 0.75% – the lowest in recent history! This is a new record low, hence the relentless waves of media coverage and major talk about what the implications are.
So, why did the RBA do this? Their objective was to keep house prices stable, increase employment and inflation.
Current vs New Borrowers – How It Affects You
Many of you are probably celebrating the news that interest rates are super low, especially if you’re a new home buyer! And for those who’ve been stuck with expensive interest rates on their mortgages, the news comes as a breath of fresh air.
But before we start celebrating, let’s get a better understanding of what’s happening and what the potential implications are.
Current homeowners and mortgage holders are in a better position now because:
- House prices have increased which means ‘capital gains’ have increased
- Lower re-payments after refinancing
For new home buyers, it’s important to consider both sides of the coin and strategise accordingly!
- Low interest rates are good in terms of lower re-payments on your new mortgage
- If you’re currently saving for a deposit, be prepared for lower interest earnings
- With the surge of mortgage applications, banks have implemented tougher lending standards and regulations i.e. harder for you to borrow so make sure your applications are bullet proof – here’s how
In theory, the lower interest rates is meant to help the Australian economy. At the same time, this is a historical low. Economists are bracing for impact – without knowing 100% what that exactly is.
So, what’s the best next move?
Consult a good Mortgage Broker and ask questions! Ask them what the implications are for you NOW and the FUTURE. Look 10 years + ahead. Have a long-term goal and get serious with your budget. Expect change and be prepared for it!
Talk to local real estate agents and get their take on this too, because each area and suburb will perform differently. Some areas will thrive from the new interest rate, and some might not. Your real estate agent should give you the best and insightful information about this.
If you have any questions about the St George area, please give me a call and I’d be happy to share my thoughts.