Home Buyers should consider the long term say the RBA
Buying a house is a long term commitment and borrowers should consider that home loan interest rates will change over the lifetime of the mortgage, according to a new paper released by the Reserve Bank of Australia.
Interest rates move in cycles and while we now have significantly low interest rates available, this may not be the case in 10 or 20 years time. Suburbs pinpointed for being cheaper to buy than to rent only consider the current low variable interest rates, but the historical average for interest rates in closer to 7.5 percent, says the Herald Sun.
According to the paper by the Reserve Bank, economists call housing a 'superior good' investment, with household spending growing in correlation to growth of income. As no dramatic growth in the average household income is expected in the foreseeable future, buyers should not expect any 'boom' in property prices either.
In the last month the popularity of fixed rate home loans dropped an average of 4.26 percent across Australia. Recent RBA interest rate cuts have caught the attention of home buyers who are shifting their attention to variable rate home loans, says Belinda Williamson of Mortgage Choice.
Whilst potential home buyers should consider the long term cycle of interest rates, the current low variable rates could be an excellent opportunity to get a foot in the property market and choosing a low rate home loan would significantly lower the price in interest repayments on a new home.
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