It’s time to stop procrastinating and get into the real estate market: Terry Ryder

This is as good as it gets, folks. It’s time to stop procrastinating and get into the real estate market. 

The Reserve Bank’s latest reduction in the official interest rate, which will probably translate into a 20 basis point decrease in mortgage rates, is the icing on a cake that’s pretty tasty for property buyers. 

The ingredients of the cake include higher incomes, lower prices, greatly improved affordability and interest rates at GFC levels, against a background of solid economic performance, low unemployment and, at long last, rising consumer confidence. 

According to the figures that comprise the HIA-CBA Housing Affordability Index, the median dwelling price is 5% lower than it was two years ago.

In the same time frame, average weekly earnings have risen 7.45%, while the interest rate marker they use has dropped from 7.12% in March 2011 to 6.03% in September 2012. Since September, we have had two interest rate reductions from the RBA. 

So we have had seven consecutive quarters of improving affordability, followed by the rate cuts in October and earlier this week. 

Figures from Mortgage Choice show that, since October 2011, the average standard variable rate has reduced from 7.79% to 6.6% (prior to this week’s RBA cut). Monthly repayments on a typical $300,000 loan over 30 years have fallen from $2,158 to $1,916, a saving of $242 per month. 

Looked at another way, those who have maintained their repayments at October 2011 levels will have reduced their loan terms by close to eight years, saving well over $100,000 in interest over the life of the loan. 

Buyers have been responding to the improving situation – gradually but steadily – with loan commitments to owner-occupiers up 5.5% in the past 12 months and loans to investors up 4%. 

But surveys have suggested many consumers were awaiting another trimming of the official interest rate before getting into the market. Now they’ve got their Christmas present. 

So the fence-sitters are all out of excuses. It’s really not going to get any better than this. 

Capital city prices have stopped falling and are now trending up in most the big cities. We have now had six interest rate cuts since October 2011 and we are unlikely to get more any time soon. 

Everything you’ve been waiting for is now in place. Stop mucking around and get active.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.