Whether you are a first home owner or a veteran investor, it pays to understand why you are paying a certain interest rate. By looking back through the history of interest rates, you may be able to gain a better understanding of what you might have to pay throughout the life of your home loan.
The significance of interest rate trends
It is essential that you do your homework when it comes to interest rates on home loans. Why? One reason is to make sure that you are getting a fair rate when you compare lenders. By accessing information about how the interest rates have changes in recent history, you will be given a good idea about how much you should be paying when applying for a mortgage.
Another reason why you should be doing your research is to help you make an informed decision about choosing a variable-rate mortgage as opposed to a fixed-rate mortgage. The interest rate for variable-rate mortgages changes along with the market rate. If you’re buying when interest rates are high, then you might want to opt for the variable-rate option so as to take advantage of lower interest rates in the future. However the only way you’ll be about to ascertain when interests rates are likely to drop will be to learn about how these rates have changed in the past.
Historical Interest Rate Trends
In the early 1980s interest rates climbed as high as 17.5 per cent, however since the early 1990s, interest rates have been on a downward spiral. Today, many Australian lenders are offering variable rate mortgages with interest rates of just 5 per cent.
At the moment, the Reserve Bank of Australia’s official cash rate is set at 2.5 per cent. This is the lowest the cash rate has been for decades. However it is important to not confuse the cash rate with the interest rates offered by Australia’s lenders.
The cash rate is monitored and set by the Reserve Bank of Australia to ensure the stability of the Australian currency as well as the economic prosperity of Australians. The cash rate does indeed affect mortgage rates; however it is not the only influencing factor at play when Australian lenders are setting their mortgage rates.
These days, Australian lenders are offering some of the lowest interest rates in decades, making now an excellent time to jump onto the property bandwagon.
To compare interest rates on your current home loan or see how you could benefit from a fixed or variable interest rate, contact one of our expert mortgage brokers on 02 9299 7044 or visit www.clarencestreetmortgages.com.au