11 November 2011
"Don't get burnt if rates rise and house prices fall" says leading direct lender MyRate.com.au
Despite interest rates recently decreasing, direct lender www.MyRate.com.au is warning borrowers not to bite off more than they can chew because the current environment may not last forever.
Prospective borrowers should certainly bear that in mind when considering getting a home loan. While interest rates remain low for the moment, Sherman is cautioning those who are already nervous about future repayments. "It's important to take stock and ask yourself the question: 'will I be stretched in my repayments if rates rise?' ".
Home loan rates are low at the moment, however the current level is still way below the peaks of the mid 90's when rates were around 10 percent. Current rates are at least one rate rise below the decade long average from that period.
Lower rates are unlikely to last forever. "There is always the possibility that house prices will fall and rates will go up during the term of your loan. Borrowers who bet against this could find themselves in trouble" explains Sherman.
At a minimum, Kevin recommends that Australians looking to take out a variable home loan action the following 2 checks before signing any home loan contract:
- Variable rates change so plan your finances and budget for several interest rate increases. If repayments are tight at current levels, consider how you would cope if rates were higher; and
- Compare home loans and shop around. Look for a lender with a good reputation and a product with a low interest rate and low fees but that still has all the flexibility you need to help reduce interest payments, such as allowing for additional repayments and redraws. Interest rates can vary by as much as 1 percent so shopping around really can yield significant savings.
Having satisfied themselves that they wish to proceed with obtaining a home loan, borrowers should also familiarise themselves with the loan application process and understand what may limit their chances of success. In our blog, MyRate reviews top 5 reasons borrowers are being rejected in the current lending environment.
