G'day Jingo,
Umm, I reckon the increase has been a little more than "marginal".
Forget the "base rate" - let's talk of the average mortgage (actually NOT as bad as using the Base Rate...) These have risen from 6.5% to 8% - give or take a bit.
What percentage increase is that? And have rents kept up with this increase?
(For those "calculatorally challenged"
the Interest rates have risen 23% over the last 2 years or so). Slightly more than marginal I would think..
Regards,
Hi Les,
Yes, it would seem rates have risen more than marginally over the past two years if the average mortgage rate is taken into consideration.
My rents in inner Melbourne have risen between 15 and 20% this year. I can give an example of one of my IP's.
TownHouse in Nth Melbourne.
Purchased in 2001 for $227,000 + stamping @ 5% = 238,350 Using your interest rates above the impact of the rental increase and interest rate rise would be:
Loan Cost of Holding Property in 2005, (2 years ago) @6.5% =$15492
Less rent @ 300 p/w =$15600
Cash flow to put towards holding costs =$108
Loan Cost of Holding Property in 2007 @ 8% =$19068
Less rent @ $360 p/w = $18720
Negative cashflow to put towards holding costs=$348
Ouch, That was an interesting exercise. The only consolation in my situation is that my interest rate on this property is closer to the 6.5% as it is fixed. Tax has not been considered either - these are just raw figures. But Les, that is certainly food for thought!!
So my situation as it now stands with this IP is:
Loan cost of holding IP in 2007 @6.95% = $16565
Less Rent @ 360 week = $18720
Cash flow to put towards holding costs =$2155
Regards Jason.