Page 20 - Tropic Magazine Issue 37

TROPIC • REAL ESTATE

Rates rising

MORTGAGES
As interest rates continue to
climb, Tropic has sought advice
and expertise from mortgage What benefits and drawbacks should
broker and owner of Astute people consider in terms of fixing their
interest rate?
Financial North Queensland, The major benefit is that you are
John Watts. guaranteed your rate won’t go any higher
than what you have fixed it as.
What is your prediction for how high The negatives include more restrictions,
interest rates are likely to go? for example some of the banks won’t
I want to make it clear that this is my allow you to pay any extra off your loan,
opinion only. Interest rates are coming and if you do want to refinance during
off the lowest they have ever been and are that fixed period, sometimes you have to
now returning to where they need to be. pay what’s called a ‘break cost’.
I think that the variable rate in two years’
time could be sitting at between five and What other options are available?
six per cent. That’s the consumer rate, not Everyone should be calling their bank
the official Reserve Bank cash rate. every 12 months regardless of what
The fixed rate is already around about interest rates are doing and asking if
that now. the rate they are on is the best offer. Median asking sale price
Another option is paying interest only for a 3-bed home in Cairns
Is it still worth shopping around to get a and a lot of people with investment $497,000
better rate? properties do that, however usually the
For sure, there are heaps of banks who are bank will ask you why you wish to do that Median asking rent for a
3-bed home in Cairns
actually paying people to come and deal – they don’t like it. Borrowers also need to
with them. We have customers who are budget accordingly and if they do get into $522/week
getting two or three thousand dollars to trouble, they need to communicate with July figures. Source: SQM Research
move across. their bank.

How will rising interest
rates affect home loan
repayments?

The Reserve Bank of Australia has
forecast that inflation should peak at
around seven per cent at the end of the
year and Governor Philip Lowe has said
the cash rate could rise to 2.5 per cent.
Analysis from RateCity shows if the
cash rate does hit 2.5 per cent, a
borrower paying principal and interest
on a variable rate $500,000 mortgage
would see their monthly repayments
rise by around $600. That’s compared
with what they were paying before rates
started rising in May.

20 • Tropic • Issue 37