In it’s recent update property research company Residex forecast that interest rates may not move up as much as some suggest.
Their interest rate model indicates that the maximum home loan interest rate we shall see over this current cycle (20 years), is in the order of 8.5%.
This suggests that increases in rates to come are not going to be as much as 1% andbasically we have already seen the majority of the rate increases.
The report explains that since the RBA commenced its rate tightening process in October 2009 we have seen a series of 0.25% increases totalling 1.75%. Today the Variable Home Loan Rate is in the order of 7.75% and this suggests that over the next 12 months there are potentially not more than 0.5% to 0.75% in additional increases.
In dollar terms, for the typical loan of say $400,000 this translates into an extra weekly cost of $50.
For the investor given tax deductibility of interest the increase is very modest and not something that should deter. Add to this the fact that housing shortages can do nothing other than cause rental increases and we have a recipe for things only getting better for the investor says Residex.
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