Interest Rates Stay Put

Greetings

It was with a sigh of releif that the Reserve Bank of Australia kept interest rates on hold last week. This has meant that property owners accross the North West Coast don't have to worry about another rate rise for at least another month. It also means that we have a more stable borrowing environment for anyone looking to buy property.

This is great news for the real estate market in Tasmania and anyone who owns property should be happy. Obviously we can't tell when the RBA may increase rates again but the important thing is that rate rises are happening less frequently than 6 to 12 months ago. This means that the finance world is becoming a friendlier place to be borrowing money in.

Most importantly, the cash rate is still only at 4.5% which may be cold comfort for some considering that the banks move independently of the RBA but what it does mean is that our rates are still low.

What we really need to consider is that most banks are still lending at rates between 7% & 8%. Whilst this is not as low as rates were say three years ago when they were 6% or lower they are still lower than 10% and relatively a long way from this figure which is good news.

For example: if you currently have a home loan at 7.5%, based on the current RBA rate rise trend of .25% you have to wait for another 10 rate rises before your rates reached 10%. That's a long way to go before reaching panic stations and considering we have already had 5 rate rises in a row it's highly unlikely that we will have another 10. If that were to happen we would have had around 15 rate rises in a row! Not likely.

Rates are going to go up and down, it's what they do. The baby boombers take great delight in reminding younger people of the 17.5% interest rates under Labor's Paul Keating in the early 90's but nobody seems to talk about the good times when rates got as low as 5.5% in the early 2000's. The fact of the matter is that people remember bad times more than they do the good times, at least when it comes to money.

What we have to do today is remember that when we borrow money we elect to ride on the interest rate roller-coaster and we accept that over the life-time of our loan we'll have good times and bad, and that's ok.

The most important thing to do is to figure out if you can afford your loan based on an interest rate that's around 2% higher than what the current rate is. If you can manage that repayment then you should go ahead and borrow. if you can't maybe you need to wait and build your deposit or buy cheaper. What you shouldn't be doing is borrowing to your maximum limit based on the interest rates of the day. You should ALWAYS allow room in your budget for interest rate movement.

For real estate advice - Halliwell Property Agents 6424 1496