With the Reserve Bank’s seemingly weakened control over the banks benchmarking of interest rates, we face a period where the market will set the benchmark for interest rates. That, in addition to Westpac announcing 560 job cuts and ANZ 1,000 job cuts; it seems that the banks might be preparing for a sustained period of intense market competition. The intense market competition is you!

This will have flow on effects for Investment Property and Investors, both positive and negative.

Firstly, the banks will become more competitive in offering Developers funding for their projects. For investors, this indicates a potential for increased supply in the market. Investors should avoid geographical areas where there is a large amount of supply already approved for commencement. It is probable that if the financiers are now prepared to lend more to Developers, these ‘shelved’ projects will commence construction and be brought to market.

Secondly, the banks will be competing for your mortgage. For investors, this simply means that shopping around for a bargain interest rate mortgage will be rewarding. Thus, your holding costs will be reduced.

In summary, this simply calls for more diligence when making your investment decisions. Make sure your investment is not subject to potential oversupply pressures, which will soften the yield and capital growth returns. Also make sure your broker has investigated your mortgage options thoroughly to get the best mortgage product for your circumstances.