Property investors are hundreds of dollars per month better off now than they were two years ago, with falling interest rates and rising rents providing a healthy income boost, research shows.
On a typical house with an interest-only home loan of $400,000, property investors are $601 per month in front compared to two years ago, SQM Research has found.
In the past two years, variable interest rates have fallen by 1.4 percentage points, while average house rents rose by 6.3 percent nationally – and 14 percent over the past four years.
But investors are unlikely to see continued growth at this level, according to SQM managing director Louis Christopher. He expects “modest to moderate” house price growth ahead, but believes rent rises will be constrained.
Owner occupiers also ahead
Investors aren’t the only winners, though. Existing borrowers and first home buyers looking to enter the market this year are facing improved market conditions with lower interest rates, a slower mortgage market and modest growth in home values, said Michelle Hutchison, spokeswoman for RateCity.
“There’s a great opportunity to enter the property market this year if you’re prepared with a decent deposit, researched the home loan market, and have a stable income,” she said.
“Low interest rates are making it more affordable, lenders are willing to negotiate and the low buyer demand also gives buyers leverage when haggling on properties.”
This week lenders faced off by slashing variable home loan rates out of cycle, rather than taking their cue from the Reserve Bank on rates. IMB cut one home loan by 0.05 percentage points, BMC Mortgage cut several loans by 0.10 percentage points and Holiday Coast Credit Union cut several loans by 0.20 percentage points, RateCity data revealed.
“While there have been several rate increases out of cycle, we’ve never seen lenders drop variable home loan rates while the cash rate remains stable. Lenders are obviously feeling the pressure of the slow mortgage market and are doing whatever it takes to attract new business,” said Hutchison.
No cause for complacency
“It’s easy to become complacent with your home loan when the market is good and rates are low. But borrowers who allow their home loan to lay idle and assume their lender is doing everything they can to help them reach their home ownership goal may be surprised at what they could be missing out on,” she said.
“Now is a good time to compare your home loan with others on the market, failing to do so could mean passing up the opportunity to save thousands of dollars in interest and even cut years off your home loan term.”
It’s also a good time to get ahead with your repayments and build a repayment buffer in preparation for tougher times, she said.
“Paying just $50 per week extra towards your home loan may not seem like much but on a 30-year, $400,000 home loan it could save you more than $25,000 in interest.”