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What do interest rate rises mean to the property market?
The beginning of October saw the Reserve Bank of Australia (RBA) lift official interest rates for the first time since March 2008. Many economists believe there will be more increases before the end of the year.
People are asking the question, what does this mean to the property market? The overall affect on the housing market is not likely to be dramatic. We are already seeing first home buyer demand winding back as the boost to the First Home Buyers Grant has now been halved and the fall back of first home buyers’ volumes is likely to continue. We are also seeing buyers stop and think about what they can afford to avoid over committing to big loans at today’s unsustainably low interest rates. At Fitzpatricks Real Estate we are seeing enquiry and open house numbers down slightly from recent months. .
We are seeing more non first time buyers and more investors enter the market. Many investors are looking to lock in purchases before rates, and property prices increase.
Rate rises should have been planned for and most property owners should have been factoring a more normal mortgage rate into their budgets.
It would seem the best opportunity to lock-in interest rates at a competitive rate has now passed, with almost every bank already increasing fixed rate loans during the past two months. Evidence suggests that over the long term, home owners pay less on a variable loan, however, fixed rate loans have their place for those seeking certainty of what they have to pay each month.
It is impossible to predict what interest rates are going to do in the future. It is important to speak to your financial adviser who can help advise you on the best outcome your individual situation.