Q. Everyone keeps telling me I should start to build my property portfolio while interest rates are low, but surely they will inevitably rise again? How can I protect myself from a rate rise and avoid overcommitting while rates are enticingly low?
A.It is true that with rates so low you are able to borrow more at the present time. Of course, rates can’t stay at historical lows forever, and eventually they will rise.
In order to protect yourself against a rising rate environment, I would advise you to look closely at fixed-rate home loans. Fixed interest rates are currently sitting at all-time lows and in some instances they are lower than the variable rates on offer. Better yet, some of the longer-term fixed rates (four-year and five-year) are priced below six per cent. By historical standards, a home loan with an interest rate below six per cent is very competitive.
With this in mind, it may pay to consider locking in your home loan for five years – especially if you are concerned about the possibility of future rate hikes. Fixing your mortgage will not only provide you with peace of mind and certainty around your mortgage repayments, but a five-year fixed rate will reduce your exposure to any rate hikes that may occur in the medium term.
Before you make any decisions about property investment you should speak to your accountant and mortgage broker. They will help you understand any tax implications you may face and assist you with your property structure and home loan needs. Furthermore, a mortgage broker will help you find a product that is not only competitively priced, but meets your needs both now and into the future.
Matthew Rogers, franchisee, Aussie