The Reserve Bank of Australia’s decision to leave the cash rate on hold at 2.5 percent today is a welcome one for variable home borrowers, bringing repayment relief for at least another month, according to Australia’s leading financial comparison website, RateCity (www.ratecity.com.au).
Alex Parsons, CEO of RateCity.com.au, said: “In light of the recent Federal Budget, where frankly, most Australians are going to be worse off, it’s great news for mortgage borrowers in that their repayments will be steady for another month.”
“For many Australians out there, particularly those buying their first home in the east coast city markets it’s very difficult to get a foot on the property ladder, and it’s likely to get harder as Budget cuts hit the hip pocket.”
Yet, recent research (HIA/CBA Housing Affordability Index) has indicated that the record low rates, coupled with some increases in income, has made housing affordability better than it has been for the last 12 years.
“While that may be surprising for certain people trying to get into the house market, a combination of low interest rates plus income increases over that period of time has caused this impact,” he said.
But Parsons warned would-be borrowers against overstretching the budget to get into the market now.
“Despite the housing affordability being its best position for the last 12 years, for any Australian out there, particularly buying their first home in the east coast city markets, it’s still very difficult,” he said.
“So my tips for those types of home buyers would be to be wary of interest rates going up in the future. We have record low interest rates today, but make sure that you can afford a 2 percentage point increase in interest rates and still be able to make those repayments. If you can’t you’ll soon find yourself in mortgage stress and that’s not a good place to be.”