As economically stable as Australia might be right now, just twenty five years ago things weren’t anywhere near as comfortable as they are in 2016. Banks were well-known for proposing ridiculous repayment terms on their mortgages and in the 1990s, interest rates were at a record breaking all-time high. But how bad were things back then and were they really that different to how they are now?
The shocking truth about previous interest rates
In 1990, regional lenders in Australia proposed interest rate percentages of 17.5%. What that means is that if an individual was to borrow $100,000 for the cost of a home (which back then was much lower than it is now), over the course of ten years, they’d be expected to repay $833 per month. With interest added, this amount would quickly grow by roughly $63 to total just under $900 a month.
Instead of $720 a month with interest, they’d be expected to pay back $2,880 every four weeks!
How have things changed?
Now compare the same loan with today’s amounts – at 1.5%, banks are now offering rock bottom rates. If a person was to borrow $400,000 over fairer repayment times (which are now extended by banks and can be up to 25 years in length), the borrower would be repaying just $1,333 a month (before interest), instead of $2,880. Longer repayment periods are a great way to reduce monthly costs and this makes even sums over $500,000 a viable option for many residents in Australia.