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AU Join in the rates party before it ends

Property Here - Saturday, May 18, 2013

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YOU'RE in for a special treat today.

I've just finished writing a song that celebrates something loved by property owners everywhere.

You can sing it to the tune of O Christmas Tree or any other motivational rock anthem that you like. It goes a little somethin' like this:

O interest rates, O interest rates, you're groovy when you're falling,
O interest rates, O interest rates, we want you to keep falling,
'Cos 3 per cent is nice and low, but two per cent is better,
O interest rates, O interest rates, please hear our greedy calling.

Record low official interest rates have many real estate owners singing with joy (some may even write extremely lame songs) but now is not the time to take your eyes off the ball.

You may be saving a handy amount of cash in mortgage payments, and some economists believe rates may fall another 0.75 percentage points, but these good times won't last.

Here are four key questions to ask yourself to make sure you are getting the biggest benefit from today's low rates:

* Are you getting a discount on the variable rate? It should be between 0.7 and 1 percentage point, largely through a package deal that most lenders offer these days. If you're not getting that discount, hunt elsewhere.
* Have you built a buffer? By maintaining your previous repayment or even adding a bit, you'll pay off a bigger chunk of the loan principal, which will provide relief in any future financial emergency.
* Should you fix now? Standard variable rates are nearing 6 per cent, but some fixed rates are closer to 5 per cent and also falling. If you want the security of certain repayments and understand the risks of fixed, it's worth looking at.
* Do the rate cuts deliver the best bang for your borrowed buck? While it's nice to pump extra cash in into the mortgage, if you have expensive consumer debt at 15 or 20 per cent interest, it makes more sense to wipe off those loans first before directing savings to the mortgage.

Managing your mortgage wisely now can deliver big financial benefits down the track.

Perhaps even enough cash to start a record label to publish dreadful songs.

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