The Reserve Bank is concerned the economy has slowed to a standstill and have flagged the possibility of a rate drop. So batten down the hatches, this could be the start of a wild ride for property owners and investors alike, as property prices come under pressure from higher unemployment and 5% inflation as the norm!
So how will this effect mortgage holders and prospective first home buyers?
Looking through the spin I think it means very little. Major lenders are enjoying improved profits and won’t want to give them up. Money will still be tight as lending policies have changed to reflect the popular media rhetoric about Australian’s needing a new age of responsible lending or we will explode.
For existing mortgage and home loan holders, my advice is to consolidate your loans. Move debt from credit cards to home loan, reduce your limit to $500 on your credit card, it will stop you over spending. Then pump as much as you can into your home loan. Plant some summer vegies and set yourself a four year plan to halve your loan. By the time the next Olympics’ comes around you could be sitting pretty.
For new owners, sit tight, find ways to save money, plant some summer vegies, see if you can’t halve your loan in four years. Do not buy a new car! Learn how to maintain your current one, keep your spending under control, pay off your credit card. If I sound like your father, it is because I am probably as old as him. Take a look at the historical interest rates for Australian home loans over the last 49 years, the best way to avoid being effected by this rollercoaster, is to not have a loan, so pay it off. Oh! and get some mortgage checking software, banks and other major lenders make mistakes all the time. Make sure you are not being ripped off.