Buyers who choose to wait and see what interest rates do could see their borrowing capacity reduce…substantially...
I have recently been speaking to a number of first time investors who tell me that they are just going to wait and see what happens with property prices, interest rates, etc. however there is a catch to doing that.
As interest rates go up, and we know they will go up another % or 2, investors borrowing capacity in real terms goes down. So waiting to see what happens actually means some investors are unknowingly excluding themselves from the market.
An example for an average potential investor:
- A 1% interest rate increase can reduce borrowing capacity by about $100,000
- A 2% rise more like $200,000
With numbers like this, it demonstrates that the decision to wait for the inevitable interest rate rises may stop you from becoming a property investor.
Lenders are not going to let anyone borrow above their ability to repay the loan so that is not an issue.
Of course no-one wants to feel they are buying at the top of the market but remember it’s more about TIME IN THE MARKET rather than timing the market. Even waiting 12 months may mean potential investors will never be able to realise that investment property dream.
Investors who are looking to buy in an area like the Sunshine Coast where there is still a steady increase in the population of around 9%, then they are buying into a market that will not go down as it’s supply and demand which creates growth. Also, the reality is that as of 1st August, Australia-wide, property prices have only dropped less than 0.5%.
So if you’ve been thinking of investing but hanging back to see what happens, I would encourage you to at least look at what your options are now, check out all the financial benefits, risks, and costs, then you are financially informed and can decide what to do - it costs nothing to check out your options.
You know how to contact me should you want to discuss in more detail or want a free no obligation financial consultation.