Record low interest rates keeps the property market sizzling

It’s the tiny number that has a massive impact on our economy – and Australia’s interest rate is expected to stay small for some time yet.

The Reserve Bank opted to keep the official cash rate on hold at 0.1 per cent at its April meeting. This was the fifth time the rate was cut or held at the record low, making it fifth time lucky for mortgage holders. The RBA moved to the current rate late last year to help mend Australia’s economy and create jobs amid the coronavirus pandemic.

While our economy is on the up, the RBA says the interest rate will not increase until unemployment is within its preferred range of about 4.5%. This is unlikely to happen until at least 2025, boosting the confidence of property investors and aspiring home owners alike.

Real Estate Institute of Victoria data shows that when our interest rates sink, our interest in property often soars, with February 2021 recording the highest auction clearance rate in 11 years, with 84.8 per cent selling. The REIV also estimates a staggering 35,000 property transactions have taken place since January this year.

While first home buyer incentives, mortgage repayment holidays and resumption of auctions after Victoria’s 2020 lockdowns are helping drive the demand, our low interest rates are the icing on the cake.

For those currently paying a mortgage on a property, lower interest rates can offer relief in the form of lower debt repayments and present an opportunity to get ahead on their home loan.

More affordable mortgage and credit card payments ultimately boost people’s disposable income and encourage personal spending.

For those looking to enter the market, lower interest rates can be a chance to put their money to work. It appears many of us are aiming to do just that, with figures from the Australian Bureau of Statistics revealing that Australians borrowed $6.93 billion to invest in residential real estate in February this year, jumping more than 50 per cent from June last year.

The RBA’s expectation to not hike the cash rate for three years or more means aspiring property owners can project their initial outlay costs more easily.

Owners can feel more confident around repayments remaining affordable when their mortgage is at its highest in the first few years. This is particularly important for investors, who generally have higher interest rates attached to their loans than owner-occupiers.

So whether you’re chipping away at your current home loan or looking to buy or sell, there is plenty to read into these rates.

At Noel Jones, we’re here to help guide you every step of the way on your property journey.

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