At the start of the 23 year period, 1990-2012, the interest rate for the standard variable housing loan (SVR) was at its highest level over the whole period, at 17.0%. This lasted for three months from January to March 1990. The lowest level for the SVR was 5.75%, lasting only two months, in April and May 2009. We now have a cash rate that has sat at 2% for the last two months, a steady decline over a 18 month period from a modest 2.5% and rates lenders are offering rates below 4% in the current climate.
When the RBA alters the official cash rate, most lending institutions follow suit and adjust their variable home loan interest rates by a similar amount, however we are now seeing the major lenders flip and some have raised their rates to higher than the official rate rise. For example, we have seen Westpac increase their standard variable rate by almost double this year.
When borrowing, you will need to do your homework before deciding on a fixed or variable rate. Standard variable mortgages are ideal for all borrowers and first homebuyers looking to enter the market in the next 6-12 months and will benefit from additional features they offer such as redraw facilities, the ability to make additional payment and offset accounts. If used properly, this will reduce the amount of interest you will pay and the term of the loan. First homebuyers need to make allowances for the low interest rates they are entering the market with and most lenders recommend allowing for at least 2% rise when budgeting for repayments. If you want some certainty in your future I’d be fixing my interest rate now, if not for the whole at least do half of it. At time of posting 3 year fixed rates are available from 3.94%.
Lenders are continuing to offer very competitives deals for home loan borrowers making finance for owning a home more affordable than ever. Brokers are also seeing many clients looking to seek a better deal; rates are not only low, but the competition for banks to get your business is high! Even more competitive if you’re borrowing under 80%.
Experts wholeheartedly agree that Perth’s housing market has slowed. The slowdown in the mining sector has caused a decline in the market, with properties listing up considerably on a year ago when there was 10,538 compared to 14,289 properties today. Fortunately the ship seems to have steadied. The unknown at the moment is how much further the rental market will decline with nearly 8000 vacant rentals in Perth in comparison to this time last year at 5,608.
So if you can, go buy something! It’s a buyers market and if you don’t try to pick the top or the bottom, of the market and hold for the long term you will do very well. I’m in real estate and I can’t pick the top or the bottom, all I can say is this current cycle we seem to be very close to the bottom. As I’ve said before, this is the perfect market to upgrade to a bigger home or more land as the gap percentage wise is as small as it gets. When the market shifts again it will be too late and the gap to trade up will get wider.
For more advice on where to buy and how, don’t forget the team at Naked are just a phone call away. We also offer a range of calculators you might find useful when buying or selling a home, finding out your borrowing power or calculating your mortgage repayments.