RBA’s Warning On Interest Rates Means Home Buyers Need to Plan Ahead
Mortgage House of Australia Managing Director Ken Sayer has warned new home buyers to plan ahead for home loan interest rate rises.
“Yesterday’s warning by the Governor of the Reserve Bank of Australia, Ian McFarlane, that home loan interest rates may rise in the coming months is a clear message,” said Mr Sayer.
“Make sure your income can cover your home loan borrowings plus any future rate rises.”
Mr Sayer added: “All too often in the last few years we have seen prospective borrowers trying to shop around home loan lenders to find who would offer them the largest home loan. What they have missed seeing is that those lending criteria are based on making sure that you will be able to afford your home loan payments and still keep food on the table.”
“The heady conditions of the last few years have seen some borrowers stretch their home loan finances too far, leaving little disposable income after they have paid their home loan and with little margin to be able to afford to meet increased home loan payments that will come with a mortgage rate rise.”
“If you are looking at borrowing now, we strongly urge people to factor in for home loan repayment based on mortgage interest rates of at least 2.0% above the current levels. That should give you a good comfort margin if home loan rates do rise. We must not lose sight of the fact that we are very much at the low end of the mortgage interest rate spectrum and we should always keep in mind contingencies for home loan interest rates going up significantly in the future due to some unforeseen circumstance,” said Mr Sayer.
“Property remains, and is always likely to remain, one of the best long term investments around. People should not be scared off buying a home but they should make sure that their home loan borrowings are affordable, not just today, but for the future as well.”
Mortgage House have provided the following 5 home loan tips for people looking at taking out a mortgage right now.
- Make sure you have completed an honest, comprehensive family budget to work out what you can afford in home loan payments.
- Always work out if you can handle home loan repayments, not just on the current mortgage interest rate, but on home loan interest rates at least 2.0% higher
- Make sure you are buying a property that you are prepared to stay in for at least a few years – that way you can ride out any short-term downturns
- Make sure your home loan is a flexible one that suits your needs – for example, one that you can redraw on if times get a little tougher.
- Make more home loan payments while mortgage interest rates are low – capitalise on fact that home loan are currently ‘cheap’ by paying off as much as you can now
- Issued for Mortgage House Home Loans by Wilkinson Media, 8969 6255