It was certainly a relief to see the RBA keep rates on hold last Tuesday, and whilst a 0.25% rate increase is widely expected in May, the pause in April did give us the first positive sign that we are close to the peak.
What’s even better, is that there are likely going to be rate drops starting at the end of this year, or the beginning of next year, and they could be between 1% – 2%, depending on which forecast you’re reading.
Almost instantaneously, consumer confidence increased, and relevant to the property industry, the Index ‘Time to Buy a Dwelling’ increased by 8.2% from 65.7% to 71.1%, effectively meaning buyers are starting to be a little more interested in making a move. Supporting this is a slight increase in property values across the country, from a total value of $9.3 trillion to $9.4 trillion in February, going against the trend of monthly decreases since rate increases started in the first half of 2022.
The need for homes has never gone away, and whilst the amount buyers can spend has decreased due to borrowing capacity and affordability with rate rises, the demand has never ceased. This is why I’m convinced that now is a great time to be buying if you can. We’ve seen this cycle so many times, and the market will inevitably heat up again.
As far as what to do with your current loan, I’d still be suggesting sticking with a variable rate unless you really need certainty with your repayments. Fixed rates are starting to reduce, although if you factor in the forecasts with rates going down, fixing for any period of time from 2 years and beyond appears to be more expensive.
In case you’re interested, I’ve recorded a video HERE where I run some calculations on the best variable rates compared with the best fixed rates, incorporating the forecasted rate decreases and how each option fares over time.
Having said this, these are just forecasts (we only need to think back 12 months to when the RBA said rates won’t increase until 2024!) so it’s important you consider your own personal circumstances when making this decision.
We’re here to help, so if you have any questions about what you should do, please don’t hesitate to reach out.