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Think about the future of your home loan

By James Brown

The low cash rate environment has been benefiting buyers of real estate in Bellmere for some time now, but it won’t be around forever.

When taking out a home loan, buyers need to think carefully about what will happen once rates do start to rise, especially if they’re on a variable product.

This is the advice of Rate City product director Peter Arnold, who identified that some people take a short-term view on financing their property.

“Even if rates stay low for five years, no one pays off a mortgage in five years,” Mr Arnold told the Sydney Morning Herald.

“It’s very important first home buyers don’t factor their overall borrowing amount on current repayments.”

An average five-year fixed mortgage has come down around 50 basis points lately, which could encourage some people to enter the property market when they hadn’t before.

The official cash rate has been at its all-time low of 2.5 per cent since August 2013 and if it persists until March 2015, this will be the longest period of stability in Australia’s history.

Chief economist at the Housing Industry Association Harley Dale revealed that analysis of the Reserve Bank of Australia’s recent minutes suggests this situation could well arise.

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