The 1% rate cut, delivered by the Reserve Bank of Australia on 3 February and passed on fully by the major banks, will lure investors back into the property market, according to an expert.
Craig James, chief equities economist with CommSec, said the unprecedented rate cuts over the past five months translate to a massive improvement in cash flow for those who own a property, making property an attractive investment option.
"Since September, interest rate repayments on a $300,000 mortgage have fallen by over $8,800 a year, effectively representing a 15% pay increase for someone on the average wage. In after-tax terms, the boost is even greater, equivalent to an 18.5% lift in disposable income," he said.
The overall improvement in yields is also becoming appealing. The latest data from the Australian Bureau of Statistics showed rents rising by 8% over the past year - the fastest pace in 19 years.
Source: Your Mortgage Magazine 05/02/2009
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