Published: February 08, 2009 - 09:33 PM
The Sydney Morning Herald has reported that with the reduction in interest rates, it can now be cheaper to buy than rent on an interest only mortgage.
With the recent reduction in interest rates, falling house prices, increasing rents and the available first home owners grants, the gap between buying and renting has narrowed.
The Sun-Herald has reported that interest-only repayments on a median-priced property of $536,000 in Sydney are $592 per week. Rental on a property in this price range is between $450 and $550 per week making the price difference between renting and buying being quite small.
Choosing an interest only mortgage of course means buyers are gambling that house prices will rise, as capital growth is the only means by which interest-only mortgage holders will increase the equity in their property.
Whilst interest rates have fallen 4 percentage points since September, house prices in Sydney have also fallen 4.2 per cent last year whilst rents increased by 16.9 per cent according to Australian Property Monitors data.
The ABS has recently released statistics for November which showed that the proportion of new home loans being taken up by first home buyers is 23 per cent, the highest since 2002.
Alison Walter of ShopAround.com.au said that with interest rates as low as they are, this could be a good time to enter the market.
"People renting should seriously begin to consider whether they can afford their first home. There are some great incentives available and interest rates have never been this low. If buyers are worried about meeting their mortgage commitments if interest rates rise in the future, there are many great value fixed rate mortgages available. Anyone can take just 5 minutes to compare mortgages and home loans available using ShopAround.com.au - no obligation and it's free to use!"
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