While Gracemere has gone quiet, at Affordable Quality Homes, we have noticed that Rockhampton and the Capricorn Coast are starting to experience a real estate boom!
I’ve even heard Economists call Rockhampton one of Australia’s strongest hotspots and that the market here will show above-average growth in the long term!
So, how does the Reserve Bank putting interest rates on hold affect you?
How Interest Rates Really Affect Home Buyers and Builders
As you may know, the first Tuesday of every month, the Reserve Bank decides what to do with the interest rates that the Government sells to the banks. In April, the rates were put on hold once again at 2.5 per cent.
That probably sounds like a good thing, right?
Most people are not aware that it is actually better when interest rates are going up. That means the value of the real estate is going up as well.
Over the last 100 years, on average, the value of homes has doubled every 9 years. Personally, I would think that’s better than if it stagnated or worse, went down in value!
On the same token, interest rates going down usually means that your bank will follow suit. Then, your repayments go down. That helps you to feel warm and fuzzy while you’re paying less on your mortgage payments.
Unfortunately, lower payments just means there will be more of them.
The interest rates have been on hold for awhile. And if they go down, hang on! That means they’re trying to kickstart the economy because not enough people are buying or selling.
The objective of an interest rate drop is this: the less people are spending on their mortgage, the more they’re spending on other goods and services.
They raise the rates when the bank decides that things are getting too heated and that people need to slow down on their spending. Higher interest rates cause people to take a harder look at whether or not they should get a loan.
This upswing in lending generally proves a big coup for the banks. The Government doesn’t make anything from it but they do control the economy. That Governmental oversight has been a huge factor in our avoidance of a financial mess comparable to the recent “Great Recession” suffered by the United States.
In fact, over the past 20 years wages have increased significantly while housing rates haven’t, meaning that this is the best time to buy real estate since 1993.
Dealing with Banks
As for Affordable Quality Homes, we’re looking at locking in at a lower interest rate for 5 years for every single mortgage we have. That will probably happen a little later this year.
We deal with quite a few banks. While speaking with one the Bank Managers about interest rates I learned something that I wanted to pass along to you. Banks want to work with you and they want to keep you around. So, what can you do with this knowledge?
Of those I know who’ve gone to their banks to request a better interest rate, I have yet to hear of anyone who’s been turned away. Really, anyone who asks, the banks will give it to them. Why? Because they’ve got wiggle room and they want to keep their good customers.
Bruno, our Finance Broker, gets all our customers over the line and is getting them in at 4.87% pa on 5% deposit and with next to no assets or savings pattern.
Even if you don’t find interest rates particularly… interesting… hopefully you’ll find some value in this knowledge in your future real estate endeavors. If you have any questions about interest rates, real estate, or talking with your bank, give us a call at Affordable Quality Homes!