Higher home loan interest rates should be factored in

Australia’s strong economy means higher interest rates

As Australia’s economy strengthens with lower unemployment rates, a higher $AU dollar and raising housing and rental values, we should expect higher mortgage interest rates in the coming twelve months.

There are a growing number of self funded retirees who are suffering under the low interest rates of the past year, and they would welcome a return to higher interest rates as their income depends on it.

So votes can be won and lost in the upcoming election either way, higher rates favouring self funded retirees and lower interest rates favouring first time home buyers and homeowners with mortgages.

The right course I believe is somewhere in the middle, and moderate interest rates, about one percent higher that today would give income relief to retirees and would be affordable to most mortgagors.

I have noticed a greater number of property investment ads, and this suggests that there is renewed interest in buying residential real estate to let out [buy to let]. So the RBA [Reserve Bank of Australia] would need to get the balance right to keep investment into rental properties up, and keep property prices down and thus rental down for Australian tenants not investing in property, who can’t afford to enjoy the benefits of property ownership.

Keeping everyone happy on interest rates, house prices and rental costs is always a question of point of view and personal interest, but rise interest rates and house prices are in the tea leaves for the foreseeable future.

Rick Adlam

About: Rick Adlam: Rick Adlam has been helping clients with home loan finance since 1985 when he was home consultant with AV Jennings. Rick started Equity Home Loans in 1996 to help homeowners become property investors. Rick currently consults in the development of Mr Mortgage for mortgage brokers and HomeMate for new home buyers. Website: http://www.mrmortgage.com.au