Now that interest rates are at all-time lows, are property prices set to start rising again?
Last week, the RBA dropped the official cash rate to below 3% and some believe that this year it may go as low as 2%. As interest rates have fallen, so too has the exchange rate, giving rise to a plethora of Australian stocks that stand to gain from the lowering of the Aussie dollar. But that is not the only upside.
Falling interest rates stimulate the economy by making term deposits and savings less rewarding but mortgages and loans easier to repay. If this trend continues, it could mean property is about to make a move. Yesterday, the Australian Bureau of Statistics released key financial figures for the month of March and it showed some interesting trends.
Firstly, housing finance grew. The total value of owner occupied housing commitments excluding alterations and additions rose 1.1% in trend terms and the seasonally adjusted series rose 5.8%. This is good news for the big Australian banks like the National Australia Bank (ASX: NAB), Westpac (ASX: WBC) and ANZ (ASX: ANZ), which are competing for a bigger market share of the Australian home loan market.
In the ABS's results, personal finance was the biggest mover, showing the trend series of total personal finance commitments rose 1.2%. In addition, fixed lending commitments rose 1.9% which highlights that Australians were hoping to take advantage of lower interest rates on finance products like personal and car loans. Revolving credit commitments such as credit and store cards were also up 0.2%.
Foolish takeaway
If you're in the market for loan products, you should always take note of what the interest rate is and whether or not it is wiser to fix it or leave it variable for any length of time. Usually fixed interest rates will be higher than variable but if you believe interest rates are expected to go back up, you may find it more appealing to lock in your rate while you can. However, it's important to remember that banks do their own research and make offers based on their own intelligence – most of the time it's correct.
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The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Owen Raszkiewicz owns shares in ANZ.
