If you are thinking of having any home improvements done on your Perth home, now is the time to get started. We have 70 years experience providing home extensions, home renovations and second storey additions in the Perth area. Along the way, we have become experts on the cycles of property and interest rates.
When interest rates go down, a lot of people like to play “interest rate roulette.” They think they are going to “outsmart the market” by waiting until the time is “perfect.” More often than not, they miss out on the lowest interest rates and end up getting their work done when the rates are already beginning to rise.
Recently, the RBA cut their cash interest rate to a record low 2%. So far, that is being passed on to consumers, resulting in some of the lowest rates we have ever seen. So, what could possibly go wrong? Why not wait a few more months and see if the rates drop yet again?
The Tipping Point
Many of the leading economists, lenders, investors and real estate brokers in WA believe that the current cash interest rate of 2.0% and resulting low home loan rates represent the “tipping point” at which the rate cuts finally do what they are supposed to: stimulate the economy.
David Airey, President of the Real Estate Institute of Western Australia (REIWA), believes that the latest cut will provide “much needed stimulus” to the Perth market. He says that the market has been slow as owner-occupiers and investors alike adopted a “wait and see attitude.”
Mr Airey also feels that many investors have been held back by fears that an oversupply of rental properties could make them lose money. He now feels that the latest rate cut will allow investors to positively gear their properties and not be as affected by occasional vacancies.
According to Gavin Hegney, Managing Director of the Hegney Property Group, the cut in interest rates was the “right decision for the Perth market.” He feels that everyone will benefit from this rate cut. First home buyers and those who upgrade into larger homes will benefit from the lower rates by paying less per month. Investors will benefit because lower interest rates will help them offset losses due to a shrinking rental market.
Travis Coleman, the CEO of Acton WA, feels that steady housing prices and the latest rate cut will make housing “even more affordable” to those who are waiting for the right time to buy. Shane Kempton, who is the CEO of Professionals WA, feels that investors from markets such as Melbourne and Sydney may decide to invest in WA property.
What it Means to You
So, if you are sitting in your home, wanting a better one and planning on either renovating or adding on, what does all of this mean to you? It means that the interest rates are likely to start going up again.
When the RBA cuts interest rates, they do it to stimulate the economy. The latest interest rate drop combined with government first home buyer programs that are heavily weighted in favour of buying a new home, will stimulate both the housing and construction industries. These key indicators will have an effect on other parts of the economy as well.
When the economy begins to rise, the rate drops have done their job. When it reaches a certain level, the RBA raises the cash interest rate to control inflation. Right now, you can lock in a better fixed interest rate on a home renovation loan or a refinancing of your current home loan. If you go with a variable rate, you will start enjoying the benefits of low interest rates immediately.
However, if you wait too long, you could very well find yourself looking at rising interest rates that make it more difficult to find enough money to renovate your home.
Don’t be one of those who “wish they had seen it coming.” Call Next Level Extensions today for a free consult: 1300 948 094.