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The Reserve Bank of Australia has decided to drop rates by 25 basis points to 1.50%, which is a new record low for interest rates.
According to the statement by Glenn Stevens, Governor: Monetary Policy Decision, “Supervisory measures have strengthened lending standards in the housing market. Separately, a number of lenders are also taking a more cautious attitude to lending in certain segments. The most recent information suggests that dwelling prices have been rising only moderately over the course of this year, with considerable supply of apartments scheduled to come on stream over the next couple of years, particularly in the eastern capital cities. Growth in lending for housing purposes has slowed a little this year. All this suggests that the likelihood of lower interest rates exacerbating risks in the housing market has diminished.”
What does this mean for you as a home owner or someone looking to get into the market?
For existing borrowers depending on whether your lender passes on part or all of the interest drop could result in your monthly repayments reducing. Many home owners take the opportunity to pay off additional principle by maintaining or even increasing their current repayments to fully make the most out of the low interest rate environment.
For people looking at getting into the market the lower rates could mean they can afford to borrow more money to buy a more expensive home or in a more desirable location. It is important to remember that your mortgage is likely to be over 20 or 30 years and during this time it is unlikely that mortgage rates will remain constantly this low. Accordingly seek advice from a qualified lending or financial advisor to make sure your borrowings are appropriate to your present and future position.
The Professionals Home Loan team can be contacted on 08 8100 0750 and are available to discuss and help you plan your finance requirements.
Click here to read full statement by Glenn Stevens, Governor: Monetary Policy Decision
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Interest Rates Drop To Record Low
Authors: Melissa Chaplin and Kevin J. Barry