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Jul 06

Blogathon Post 28

With the RBA set to raise interest rates by at least 0.25% next week (if not 0.5%), I really don’t envy people holding mortgages. Not only that, but some believe property prices will drop up to 10% as a result of interest rates making it unattractive for property to be used as an investment. People will therefore get hit with a negative capital return, plus an increased loss due to higher interest payments (so what if it’s tax deductible? A loss caused by higher interest payments is still a loss, even if it’s discounted by your marginal tax rate.)

On the flipside, rental rates will rise as more people decide to rent rather than buy. However, property in Sydney is already quite overpriced. Rental yields only pay for a fraction of the mortgage payments. It’s not a great time for new home owners.

Link of the half-hour: Lifetime mortgages.