Locking in a favourable interest rate is one of the most important parts of finding the right home loan. Lower interest rates mean that you can lock in a series of monthly payments that are more in line with your financial situation, which is particularly useful if you’re working on a tight budget.
As has been noted by everyone who’s anyone in the finance industry, the Reserve Bank kept the cash rate on hold at 2 per cent. Tim Lawless, Head of Research from CoreLogic RP Data said interest rates haven’t been this low since 1968!
But if you’re new to buying property and taking out a home loan, this might not mean much to you. So let’s take a quick walk down memory lane, and look at where interest rates have been on their journey to today’s low rates, starting with the early 90s!
1990: New decade, new records
Ah, 1990. Collingwood won their first title since 1958, and the first ever AFL premiership. Bob Hawke was Prime Minister, and Australia was officially in a recession period. Even Fairfax, one of the bigger media companies today, went into receivership during this year.
And according to the Australian Banking Association, January of 1990 saw Australia’s interest rates peak when the standard variable housing loan rate struck 17 per cent, and stayed there for two months. It seems unfathomable now, but don’t worry – it would soon be on the way down.
1993: A new sensation
While INXS played Wembley and took over the world, Australia’s interest rates were climbing down from the peak they reached early in 1990. Over the 30 months to September 1993, there was a steady decline to the low point of 8.75 per cent, which seemed to offer a lot of relief to home buyers.
The Real Estate Institute of Victoria notes that in 1993, the median price of a home in Melbourne was $155,500, a 14.34 per cent increase on the year before. Clearly, the low interest environment brings buyers out to play.
However, during the last four months of 1994, interest rates picked up again, rising to 10.5 per cent. Sometimes you kick, sometimes you get kicked.
We’ll keep looking at other times the interest rate in Australia has undergone change – hopefully it puts some perspective on just how affordable home loans are today!