Whether you’re considering finance for your new home or investment property financing, chances are that the current interest rate is a factor that will affect your decision. Somewhat counterintuitively, there can actually be many benefits to buying a home when interest rates are high.
Talk to your friendly local mortgage broker in Fremantle first!
Before we dive into the benefits of high interest rates, it’s important to realise that every single situation is unique and different. Add on top of that, the fact that no one can predict what the market will do next and where interest rates are likely to go in the medium to long-term future.
That’s why talking to a home loans expert or broker who has their finger on the pulse of everything real estate is the best option if you’re considering taking out a mortgage.
How interest rates affect mortgage repayments
Mortgage interest rates offered by a bank determine the amount of interest you’ll be charged on top of the loan repayments. That means that when interest rates are higher, the amount you’ll need to pay for your fortnightly or monthly mortgage repayments will be higher than when interest rates are low.
For that reason, high interest rates are generally not considered to be beneficial for homeowners or people seeking to buy a home, who would only be able to access mortgage facilities at the higher interest rates (whether they opt for a variable or fixed rate). However, there are other considerations to take into account.
Buying a home: what you need to understand
Buying a new home, even at a good price, should not always be considered as an investment. The unique factors that relate to your particular situation need to be taken into account and for that reason interest rates–be they high or low–shouldn’t be the main reason stopping you or motivating you.
High interest rates, while they are certainly not ideal for mortgage holders, do offer some silver linings that should be considered when looking to purchase a home.
In fact, there are actually benefits to having high interest rates.
1. House prices are lower
Buyers are more empowered to negotiate a lower purchase price for a home due to the decrease in demand. High interest rates mean that less people can afford to take out a mortgage and buy new houses. Less demand means that a seller may be more amenable and open to lower offers.
2. Less competition
The decrease in demand during times of higher interest rates also means that there is less competition for each individual house on the market. As a buyer, this puts you in a better negotiating position for more than just price. It allows you to make a decision on your time and without the pressure of other potential buyers swarming around.
3. Potential to refinance
While the future holds no guarantees, there is always the possibility of refinancing your mortgage later down the line when interest rates drop. Buying a house at today’s lower prices and then (hopefully) reducing your interest payments later on can offer potential for significant long term financial savings.
4. Greater bank incentives
Banks are in competition with one another for your business in the form of mortgage loans. For that reason, they offer a range of different benefits and incentives for choosing to take out a mortgage with them. During times of higher housing demand and lower interest rates, these incentives may not be as tempting as there are plenty of potential customers in the market. When interest rates are high, there can sometimes be really good offers on the table.
We strongly suggest you speak to our team here at Loan Monster to find out more about what the banks may be able to offer you.
Loan Monster: the leading provider of home loans Fremantle wide
If you’re in the market for a new home or just want to find out more about how to navigate the tricky waters of high interest rate market conditions, make sure to reach out to the team here at Loan Monster.
We’ve been working in investment property financing and mortgage broking in Fremantle and throughout Perth for years, and we’d love to help you today. Contact us today for a no-obligation and no-pressure chat.