Buy Property Now or Wait for Interest Rates to Drop?

It’s no secret that interest rates (despite recent increases) are still at a low in many parts of the world. But should you purchase during a time of climbing rates, or wait to see if rates and home prices drop even lower in future times? This is an important question to consider because it can have a huge impact on your financial future.

The Pros and Cons of Waiting for Low Interest Rates

One of the main benefits of waiting for lower interest rates is that you can save money in both the short term and long term by taking out a loan with a lower rate. This could also mean having more money available each month to put towards other priorities like savings, investments, or paying down other debts. 

However, there are potential drawbacks to waiting as well. For starters, if you wait too long, property prices may increase significantly before you’re ready to buy. When interest rates fall, the market will react with a strong purchasing appetite. This means you may end up paying much more than necessary if you don’t act quickly enough when the right opportunity arises. 

Your Personal Situation Matters 

Ultimately, whether or not it makes sense for you to buy a property now or wait for interest rates to drop depends on your personal situation and goals.

If this is a place where you will stay for the next 7 year property cycle, buying now can make sense due to potential equity gains outweighing interest payments over time.  For example, if you purchase a $785,000 property (assuming 90% loan) with an interest rate of 5%, that equals approximately $30,000 in interest payments over 7 years. However, the potential increase in price could be close to $100,000-120,000 over those same 7 years—meaning that while you may have paid $30000 in interest payments by buying now, you would have missed out on thousands more had you chosen not to buy.  However, if this isn’t your forever home or you simply don’t want to commit yet, then it may be best to adopt a wait-and-see approach.

When it comes down to deciding whether or not to buy property now or wait until interest rates drop even lower, it’s important to take into account your personal situation and goals before making any decisions. Buying now may make sense if this is a place where you will stay for the next 7 year property cycle as potential equity gains may outweigh interest payments over time; however if this isn’t your forever home or you simply don’t want to commit yet then it may be best to wait until interest rates drop further before making any decisions. No matter what approach you decide is best for yourself remember that the best time to buy was always ten years ago but the next best time is always now!

Curious to find out more? 

You can visit Serene and her team at https://www.trustedrealtors.com.au or email serene@trustedrealtors.com.au directly. If you’d like to read more about how Serene and her team are changing the housing market, you can peruse our other blog post, Women and property ownership: How Serene Teoh is building forever homes, or follow our “Real Estate News” segment on the CBR Gals Instagram.