Taking advantage of continued low interest rates

By James Brown

When interest rates are low, there are a variety of ways home buyers can take advantage of this set of circumstances. And the Reserve Bank of Australia (RBA) board's monthly meeting is as good a time as any to ponder these different strategies if you're buying real estate in Burpengary and nearby areas.

This month, the RBA decided it would hold the cash rate steady, a choice that, while commended, was also highly expected.

"We've now had four consecutive months of 'no rate change', while speculation regarding the prospect of a further interest rate reduction down the track never seems to be far from the headlines," said Housing Industry Association chief economist Dr Harley Dale.

"Regardless of whether there is a further interest rate cut or not, the RBA has done its job in providing interest rate stimulus to the Australian economy."

With this in mind, here are a couple of potential strategies for making the most of low rates, whether they get even lower or not.

Interest rate strategies

The most obvious, and popular, course of action to take is to lock in a currently low rate by switching to a fixed-rate home loan. That means, even if rates rise in the next couple of years, you'll still be riding the wave of your current, ultra-low rate. 

Whether or not you fix the rate, you might also consider making larger or extra repayments on your principal. With less to pay on interest, that frees you up to spend a little extra paying down your actual loan, which in turn will mean even lower interest payments down the line. 

Finally, if you want to really put the amount of interest you pay to a minimum, try making use of a 100 per cent offset account, where the amount of money in your account is subtracted from the loan principal. Combined with the ultra-low rate, you'll have substantially less to pay on interest, putting you closer to the goal of paying off your loan and eventually selling that property in Morayfield and other Moreton Bay areas.

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