A low cash rate is a double-edged sword. It can do wonders for the affordability of home loans, but not so much for the homes they’re for if it drives people crazy for property. A snapshot into Australia’s property market will show anyone just that.
The figures
According to CoreLogic RP Data’s monthly indices for September 2015, Australia’s combined capital cities saw a hefty rising in dwelling values. A year-on-year increase of 11.3 per cent was recorded, resulting in a $729,620 median dwelling price.
These results simply reinforce what the Housing Industry Association (HIA) observed in the June quarter edition of its Affordability Report. In that period, Australia experienced a 2.9 per cent drop on the HIA’s Affordability Index to a rating of 79.7.
But don’t take these figures as purely negative news. After all, selling a property in such a period could end in massive returns for you.
When the government steps in
A cash rate is needed to stay low to give an underperforming economy the helping hand it needs. To balance this out, the government will usually put some kind of countermeasure to prevent a market crash.
For example, the Australian Prudential Regulation Authority (APRA) recently encouraged a 10 per cent limit on annual residential investment growth. This is to restrict banks from over-lending to investors, as well as to try and cool prices down.
These manoeuvres tend to show real results too. Not only did investment lending drop, but Westpac pushed interest rates up by 20 basis points on variable home loans in direct response to the APRA’s restrictions. Chances are, other banks will follow suit.
Don’t freak out!
Home buyers, particularly investors, may finds odd increasingly stacked against them – at least when it comes to the mortgage end of things.
But there’s always a light at the end of the tunnel. We’d like to think that’s us!
We can access financial products from just about every nook and cranny. While going at it alone often means you’re only tapping the surface of the pool, we have the skills to dive right in and seek out a rate that works for you.
Alternatively, you might find it beneficial to actually refinance your loan when interest rates begin to rise. Again, we have the right tools and people at hand.
So don’t stress yourself out. Let us navigate the rocky seas of the mortgage market and find the right loan for your needs.