Entering uncharted interest rate territory

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Interest RatesAfter the most recent reduction by the Reserve Bank in Australia we are now entering into uncharted interest rate territory.

Given we have never seen variable home loan interest rates at such low levels, we though it would be useful to show you what this means in dollar terms.

Some variable mortgage holders will now be eligible for interest rates near 4.25% p.a. (see the first column below).

weekly mortgage repayments

As you can see, the weekly interest cost is now extraordinarily low.

How much rent do you think an average $550,000 unit would earn? $500 per week? $550 per week? These returns are being achieved in certain areas.

You can see why investors are jumping into the market when cash flow positive property is now realistically achievable.

You can also understand why many investors are sourcing property deposits from their Self Managed Super Funds.

With so many suburbs of Newcastle and Lake Macquarie still offering gross rental yields above 5% it is not hard to see why Newcastle and Lake Macquarie are attracting the interest of investors.

Another interest rate perspective is illustrated in our chart below. Again, if the lenders pass on this interest rate cut, the dark blue line will drop in line with the purple line below. Here is the path we have travelled since the GFC in 2009.

Average Variable interest rates

There are fixed and variable home loan offers on our panel of 25+ lenders that are considerably more affordable than the rates shown on this chart.

If you would like to discuss your options please give Margaret Godfrey Mortgage Broker Newcastle a call.

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