Interest Rate Predictions - Aussie
Interest rates in Australia are now at the lowest level for half a century. The Real Estate Institute of Australia (REIA) has just recorded a significant improvement in housing affordability and the first home owners grant (FHOG) has been increased temporarily until 31 December 2009.
So is now the best time to be buying property? Many housing experts and economists believe that now is a good time to buy property, but warn people not to get carried away and to only borrow within their means.
CommSec chief economist Craig James is warning that official interest rates are at or near the bottom, with perhaps only one more 0.25 per cent cut to come.
However Mortgage Choice's Kristy Sheppard says the future of home loan rates is unsure.
“Everyone is thinking rates will fall further and they want to take advantage of that," she said.
The Future of Rates Since late 2008, the Reserve Bank of Australia (RBA) has moved to cut rates by a total of 4.25 per cent. Starting in September with a cut of 25 basis points, which most banks passed on to home owners. That was followed by more cuts – three cuts of 1 per cent, one cut of 0.75 per cent, and lastly, in April, a cut of 0.25 per cent. The cash rate now sits at 3 per cent.
Home loan interest rates have fallen too, with most lenders passing on all the rate cuts, apart from the last one. After the RBA cut rates 25 basis points in April, only three banks moved to cut home loan rates, and only by 10 basis points. However, home loan rates have fallen from nearly 10% in September last year to around 5.5% currently.
Should I buy Now?Yes, interest rates for home loans are low. Property prices are easing, and the FHOG has been increased. For first home buyers, now is a good time to buy property, and to enter a market that this time last year was just out of reach for many. For others who are looking to buy a second property or an investment property, there is still a good chance to snap up a bargain property and get a low interest mortgage. Head of consumer advocacy for Resi Home Loans, Lisa Montgomery, says there is a “paradigm shift in how borrowers are thinking.. mortgage rates are now down to around 5% but borrowers are also looking for service, low fees, flexibility and features. I think right now there are some good deals out there.”
Should I fix my rate now?So there are a variety of home loans available. Some come with a variable rate, some are fixed rates, others come with low rates or high rates depending upon the level of features available.
Leading mortgage brokers are convinced now is the time to fix your home loan, or at least part of it. Just this week, three major Australian banks raised the interest rates for their fixed rate home loans, so now really is the time to be looking at fixing if you want a fixed rate home loan. With interest rates so low, Loan Market Group executive director John Kolenda says even though there may be more Reserve Bank rate cuts, consumers should move now to avoid missing out.
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