Who Cares About Interest Rates

Well it’s happened, there has been another rate cut which makes it the lowest rate since 2023. 

But why do people put such an emphasis on interest rates when thinking about buying or selling a property? How do they impact the market and should you care about them? 

The main reason I see is people think, it’s going to be cheaper to own a house now.

I get it, an interest rate drop means you don’t have to pay as much in interest to the bank, and home ownership might be “cheaper”. But how much cheaper? 

$500k loan: $104.17
$750k loan: $156.25
$1mil loan: $208.34

Over the year that does add up, but realistically, is $25 a week really going to change things…probably not. 

The reality is when interest rates go down, while it might make the cost of borrowing money slightly cheaper, it also increases borrowing power. 

I shared this increase and what can look like HERE in last week newsletter. 

Now the increase in borrowing power essentially means people can spend more money on the property they are looking to buy. This increase will far outweigh any savings you might have received by waiting for the rate cut to buy a property. 

So what am I getting at? 

The simple fact is, don’t become one of the heard. You don’t need to be a contrarian (a person who rejects popular opinion), you just have to believe that if you want to buy a property, there is no “perfect time”. 

The only way you know a market is at the bottom, is when it starts going up. Chances are if you hold a good property for a long period of time in a major city around Australia, it’s not going to decrease in value. 

The numbers

The key here is if you are buying a property to call home, and plan to live in it (or own it) for a period of time, it doesn’t really matter when you buy, but that you actually buy it. 

Trying to time a market is too hard, and if you get caught in the crowd it will only mean it’s going to be more competitive. 

The round-out

The good news is, it’s never too late to get started. If you have been thinking about buying a property, get out there and go through some open homes. When you’ve got a feel for things, reach out to a broker (email me if you need an intro) to get things moving. 

Another important factor when looking at or thinking about interest rates, sometimes the cheapest one might not be the best for you. Eg. Lender A might offer you a 5.75% interest rate with a borrowing capacity of $500k, while Lender B offer 6.0% but a borrowing capacity of $550k.

Now that $50k difference might allow you to buy a property in a better location, it might get you 3 beds instead of 2, or 2 bathrooms instead of 1 etc. These are the things that will enable you to buy a better property and one you would hold for a longer period of time, which as we know is what we need to do in order to see the value grow. 

I could go on about this for days, but this gives you an overview of how to think about interest rates and how they impact the world of property. 

If you found value in this, it would mean so much if you shared it around as I want to get the message out there and help as many first home buyers as possible. 

See you next week,

James Rankin
Club Captain
First Home Club

PS. We are only a month or so away from our community kicking off, so keep an eye out. I’m hoping to get 100 people onto the waitlist, at the moment we have 26 so if you do know anyone that could benefit, please do share around 🙏