If you are thinking about refinancing your mortgage and performing any home renovations on your Perth area home, there may never be a better time than now. As you probably know already, the RBA cut the cash interest rate to another record low of 1.5% in August. Their reason was that inflation was forecast below the target rate of 2% to 3%.
Why the RBA Raises and Lowers Interest Rates
The RBA takes a lot of factors into consideration when deciding to raise or lower the cash interest rate, but inflation is the main driver. If the inflation rate is below 2%, they lower the rate, counting on banks to pass on a considerable portion of the savings to borrowers. This hopefully stimulates the economy, raising inflation to the target level.
If the inflation rate goes above 3%, the RBA raises the cash interest rate to slow down inflation. The low rate encourages borrowing and higher rates discourage borrowing.
What it Means to You
We have been in a state of low inflation or no inflation for a long time. Rates have been at record lows for more than a year. It is inevitable that the rate begins to rise sooner or later because inflation and economic growth eventually start to happen again. We aren’t pretending to be economists, but we don’t see the rates going much lower if they do go lower at all.
That puts you in a position where rates are probably as low as they are going to get. If you can handle an inflexible loan, now would be a great time to lock in a low fixed rate for five years. But even if you refinance now at a variable rate, your costs at the beginning of the loan, when you pay the most interest, will be lower.
Call the Best Home Renovations Designer in Perth Today
Don’t miss out on a great opportunity; get started now. To learn more, call Next Level Extensions today: 1300 948 094.