Official rates in the US were increased by 0.25% (to 0.75%) due to an improving economy and unemployment rate. Expect that interest rates here in Australia have now reached their bottom. The RBA may cut again by April 2017, however the banks will be reticent to pass this on. I now recommend we start looking into investment 3-5 year fixed rate options (including splits) over the course of 2017.
Before doing so though, ensure that your medium-term strategy accommodates a fixed-rate option especially if you’re still in Acquisition phase. Break-costs associated with breaking a fixed-rate loan can be expensive although if you fix prior to a major rate hike, then these costs won’t be incurred.
Key take-away – If you can lock in a 3-year rate at less than 4.5% interest-only then I’d be doing so remembering that the gross rental yield we aim for in all our investments is 4.5%. Feel free to get in touch with us to see what your finance options are.
This market is still ticking all our investment boxes. Latest announcements are a $1 billion surplus in the State budget (thanks to a coal comeback), the go-ahead of Adani’s Carmichael coal mine (to be world’s largest), first stage of Ipswich City $150 million redevelopment and continued expansion of RAAF Amberley with arrival of approx 2000 extra personnel over the coming years.
There’s also still a lot of activity going into Gold Coast infrastructure in preparation for the 2018 Commonwealth Games and the Sunshine Coast is not far behind especially with the University Hospital and Kawana health precinct.
As always, land value will absorb this increase in economic growth. We just need to put a business (housing) on top of it so that we can afford to hold it. Price-points in this market are still also affordable compared to Sydney and Melbourne.
I’ve been hearing a lot of push-back recently about the NAB and their refusal to lower DHOAS interest rates below 4.35%. Defence Bank now have a 3.95% comparison rate offer on DHOAS loans plus $1600 cash-back if applied before 31st Dec 16. If you currently have lending with Defence Bank, it may be worthwhile putting a call in to see if they can also lower your current rate. https://offers.defencebank.com.au/dhoas-home-loan
From all of us at the Defencewealth team, we wish you and your family a very Merry Christmas and safe, prosperous 2017! As always, please get in touch if you’d like to start looking at your property investment and finance options over the holidays.
Quote: Wealth is like energy. It can never be destroyed. It simply transfers from one entity to another – Mike Maloney