wtfadmin

Category:


Will low interest rates last?

If you've had your eye on a Queensland investment property, now could be a perfect time to take action, as interest rates remain at a record low. 

Back in August last year, the Reserve Bank of Australia (RBA) dropped the official cash rate by 25 basis points to 2.5 per cent. And since then, it has remained the same, leading to a record time of stability. 

What does the cash rate mean for property investment?

The official cash rate influences interest rates for financial products. The most important factor for investors is the effect on interest rates for home loans. 

With low interest rates, some investors might find it more affordable to obtain financing for their property purchases. This also brings benefits for homeowners who have variable loans, as interest rates for these mortgages often follow changes made to the official cash rate. 

In a statement on the monetary policy decision, RBA Governor Glenn Stevens noted that investment in residential dwelling has picked up significantly in this low interest rate environment. He expects this to rise even further in the future.

"Strong growth in dwelling investment is likely to continue, as evidenced by the high level of building approvals and strength in other forward-looking indicators," Mr Stevens noted. 

Where is the cash rate headed in the future?

So far, commentary on the future of the cash rate has been positive. Mr Stevens noted in a statement that "inflation is expected to be consistent with the 2-3 per cent target over the next two years", which could see rates remain steady for some time. 

In addition to this, a finder.com.au Monthly Reserve Bank Survey shows rates could start to rise at some point next year. Results identified that 30 out of 33 of respondents expect the RBA to lift the cash rate in 2015, while two respondents expect this to happen 2016. 

Out of the 33 who expect a rise next year, 32 people think this will occur in August 2015, giving investors plenty of time to obtain financing and purchase property.

"It's also clear that most experts believe the cash rate won't hit the high levels we've seen in the past. And regardless of when the peak will be reached, it's likely to start falling soon after," said Michelle Hutchinson, head of PR & Money Expert at finder.com.au.

With home prices rising and low interest rates on offer, the property market could offer lucrative results for savvy real estate investors.