Unchanged interest rates offer stability and flexibility to investors.

With interest rates on hold for the second month running, what are the benefits and opportunities for borrowers? What does the current situation offer you as a potential investor?

The first positive is that interest rates are at relatively ‘normal’ levels, meaning that there is less pressure and urgency all round. In fact, it is a good time for you to be shopping around for a loan.

The average variable rate at the moment is about 7.40 per cent. St George has just reduced its two-year fixed rate to 7.14 per cent, and in general, fixed rates have been dropping in recent weeks.

In terms of flexibility, some investors will look to fix a portion of their loan, or even all of it, without the penalty of a higher rate.

The banks are also competing to grant loans to investors as the economy and employment continue to gain strength.

With unemployment at around 5 per cent, we are enjoying conditions of ‘full employment’ (4-6 per cent unemployment is known as the natural rate of unemployment). ABS figures show that 45,900 jobs were created in June alone, and this strong labour market gives individuals and banks great confidence in terms of the ability to take on and service debt for investment.

The chart below shows how interest rates have lifted from the historical 70-year lows that they reached during the GFC. After picking up again, they have now levelled off, with some signs of a downward move for fixed rates.

Overall, the picture is a positive one. The key question to ask yourself if you are planning to invest is “Why wait?”

Having just returned from Nairobi where the only stability is in the continuous chaos, I am reminded how very fortunate we are to live in a country with such strong systems of infrastructure, employment, education and health, where property remains strong due to continued increases in demand and Australia remains a beacon for all those seeking a prosperous life and where the government has enabled attractive tax concessions for property investors.

With the Reserve Bank of Australia clearly relaxed about the current situation, and with some experts suggesting the next rate increase might only be in late 2010 or even in 2011, this is as good a time as any to swing into investment action, and take advantage of the stable, flexible and competitive lending conditions currently available.

If you would like to learn more and discuss how McCarthy Group can assist you, click here.

Chart Source: Kevin Lee, Smartline