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Borrowing Capacity Soars as Rates Drop

Posted by Paul Wilson

The Borrowing Capacity (BC) of Australian Property Investors and Home Buyers has surged again with the latest cut in interest rates. John Gay, Mortgage Broker, Qld, tells us in this report………

The recent Rate Cuts have had a huge effect on what people are able to borrow. As an example let’s take a couple who each earn $35,000 pa, have no debts, and 2 kids. In August they could borrow approx. $280,000. Today they can borrow over $400,000! In most cities that’s the difference between a two bedroom unit, and a 4 bedroom house with a back yard.

Of course, what is good for our First Home Buyers (FHB’s) is, also good for us as investors. For one thing, like them we may be able to buy properties that we simply couldn’t afford six months ago. But the bigger benefit may turn out to come from the indirect effect of more competition in the market. All the extra buying activity, that the increased borrowing capacity allows, should create upward pressure on our property values in 2009. If you have investment properties in the First Home Buyer price range, ie. 450k or less, you stand to benefit from greatly increased competition for your asset, from FHB’s, and from fellow investors.

So, if, like me, you are starting to see some real upside to the market then maybe now is the time to be talking to a Mortgage Professional about reviewing your own BC! You could get a pleasant surprise! And, assuming you do, the next thing to do is to get out there and find some great value property.


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