Australia’s housing market is currently offering record low interest rates, making homeownership more accessible to thousands of people looking to buy their first home. Now the question is, how low can rates go and are these super-low good news for all home owners?
Zero or near zero interest rates. ZIRP have become the reality of the global economy ever since the GFC, with central banks in the US, Europe and Japan dropping rates to near negative territory.
For example, the Bank of England has set the current cash rate in the UK at 0.25%, while the European Central Bank’s present rate is at 0.0%. The US Federal Reserve’s present rate is at 0.5%
Australia, on the other handhas a 1.5% cash rate that’s set by the Reserve Bank, giving comfort to potential home owners that the economy is in a much better position. If you’re looking buy, then now’s the time. There are variable rate home loans that suits for you that’s available for online for quick consultation.
Moreover, interest rates are effectively at 0% in some countries and as a result of continued measures, such as quantitative easing that’s being used to improve the economy. The current cash rate of 1.5% is likely to be reduced further before we come to the first quarter of 2017. We still have a bit to go on interest rates, making Australia better placed than other countries.
The lowest rate in Australia. The Reserved Bank tracked the lowest cash rate last month in August when the official rate was reduced from 1.75% to 1.5%. While lender’ variable rates differ from the official cash rate, rates are now lower than the previous years.
What if the rates go back up? There are fears that many mortgage holders may struggle when the rates go back up and the credit starts to become more expensive. Amid the rising housing costs, many experts believe that buyers are still purchasing at the top of their borrowing capacity, which would be stretched even further in the event of an interest rate surge.
However, if you’ve taken rate rises into account before purchasing a home, then this can be avoided. Don’t focus on the now, but think about the things than can and will change, and not only for the good–but also if the interest rate go up. So evaluate your finances and ask yourself if you could still afford it if say, four interest rate rises over an 18 month period.
Low rates – is it all good? In a nutshell, lower rates should make it easier for homeowners to pay off a huge chunk of their mortgage as repayment amounts drop to match lower interest rates.However, many banks don’t always pass on rate cuts fully.