read ( words)
On the back of the banking royal commission, there have been changes to interest rates and borrowing options, especially for investors.
The recent housing boom was driven by a series of rate reductions from November 2011 when the reserve bank reduced Australia’s cash rate from 4.75% to 4.5%. Since then, the RBA has continued to drop the interest rate and the housing boom meant more opportunity for investors.
As the market has lost its buoyancy and following the exposure of the major lenders throughout the Hayne Royal Commission, banks have become more considered in their lending practices, and the property market is starting to level out. This makes it a good time for those with the funds and borrowing capacity to invest.
Since March 2019, 25 lenders have made changes to interest rates on a number of products most of which have been a lowering of up to 25 basis points or ¼ of 1% for both investors and owner occupiers.
The lowering of fixed rate loans with both principal and interest repayments and interest only repayments has meant investment could now be more available to you. In recent times it has been far more expensive to access interest only loans but these most recent moves mean the interest rates on offer for those interest only loans have come down, especially if you have negotiated a fixed rate loan with your lender.
There may some benefit for you to review any existing loans and ensure you are not paying too much. More importantly, given these changes in interest rates, it may be even more affordable to invest in the property market than it has been previously.
What does this mean for you? Is it easier to borrow to invest now? In short, yes. The market is dropping, and it is a buyer’s market. Some key indication suburbs across major capital cities have seen a price downturn in some cases of 10-15% across the last 12 months alone.
Banks may be more cautious in lending to buy an investment property and the federal election may see a change at the top end of the market for investors around negative gearing. There is a lot to take in, but it is well worth investigating, particularly if you have some equity in your current home and want to capitalise on it while the market is right.
We can help you wade through the noise, find the right product for you and advise you through the process of borrowing to invest in a volatile market.
It might be the smartest call you make this year.