The average consumer has been lead to believe in recent years that now is the time to buy with interest rates at an all-time low. While the experts have said there probably won’t be a substantial increase in the next few months, interest rates are notoriously difficult to predict.
First things first, should you be on a fixed or variable loan? While most borrowers immediately think fixed interest rates are best that might not always be the case. Since fixed rates have been historically low, banks are now looking at increasing them to make more money. On the other hand, opting for a variable interest rate loan means that potentially in 10 years when interest rates are experiencing an all-time high, you lose out. While at the moment the variable interest rate would have to increase dramatically to reach the same level as a fixed home loan rate, it’s always best to weigh up your options.
Our mortgage brokers can assess your financial position and make sure you are on the right type of loan.
Another way to stay on top of future interest rates is to look at history. Over the last 25 years the Reserve Bank cash rate has fluctuated between 2.5% and 17%. The last time the interest rate in Australia was this low was back in the late 1960’s. After that low however, it skyrocketed in the late 80’s to a whopping 17%. Taking this into account it’s fair to say that in time, interest rates will inevitably rise, whether or not it will boom to 17% or not is unknown.
However, interest rates are expected to stay relatively similar for at least the next two years, if not more. There will of course be some fluctuation that needs to be taken into account but there is a high probability that interest rates will stay low and therefore property prices will continue to rise.
Forecasting interest rates is a tricky business but having some knowledge on the topic will not only help with real estate but every other endeavour you tackle.