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Make the most of low interest rates

In the light of the Reserve Bank of Australia’s decision to keep interest rates at record lows into the New Year, now is the perfect time to assess your finances and discover how you can best take advantage of the low interest rates. We recommend meeting with your accountant and financial planner at this stage, to discuss your options.

With interest rates remaining low, it is becoming less logical to save, which makes other forms of investment more attractive, and this is where property investment comes in. Your financial situation will dictate what low interest rates will mean for you.

Low interest rates make repaying a mortgage that little bit easier and quicker, as it is often the case that you will be able to pay more off of your mortgage due to the lower rate. If you have a high level of debt, we recommend speaking with your financial advisors about how you can use the low interest rate to pay off your mortgage faster.

If you’re a tenant who has been looking for an opportunity to become a first home buyer, the low interest rates are good news for you, and should encourage you to take the step towards home ownership. If you are a homeowner already, then the low interest rates make upgrading your existing home more affordable, and may even allow some upgraders to buy a new home while retaining their existing property for long term rental purposes. Of course, like anything, it will depend on your personal circumstances as to whether or not you will have to sell your existing home in order to afford the upgrade and this is where we recommend getting in touch with your financial advisors.

One of the biggest concerns for those looking to upgrade their home is the fear that they won’t achieve the price they want for their existing property in the current market. “This will most likely be the case,” says Maree Overton, Managing Director of Peard Real Estate, “You will need to have realistic expectations, and be prepared to accept less on the sale of your home.”

But don’t let the perceived loss put you off. “Your new purchase is likely to make up for the sale of your existing property, which is why it’s important to look at the whole picture when buying and selling,” says Mrs Overton.

At the end of the day, it is important to remember that low interest rates will not be around forever and it is only a matter of time before the RBA begins to increase rates. If you’re in the position to take advantage of the current rate situation, now is the time to do so. On the other hand, you should always be wary of over-extending yourself during this time. It is all well and good to take advantage of the low interest rates, but it would be wrong to act under the false assumption that rates will not rise in the future.

We recommend assessing your personal financial situation; if your debt levels are high, then try and use this time as an opportunity to pay off your mortgage sooner rather than borrowing more, or if you are in a sound position to upgrade your home, now is a great time to do so.

If you would like more information on how you can take advantage of low interest rates, contact Peard Finance today on (08) 9273 8955.