We all breathed a huge sigh of relief this month when the Reserve Bank finally said ‘enough is enough’ and put interest rates on hold. But that followed 10 months of rate hikes in a row to sit at a 10 year high of 3.6% – last seen in 2012.
And, according to the central bank’s Governor, Philip Rowe, they are not ruling out further rate rises in the future.
At the same time, we hear all the hype around if the rates go too high, it’s doom and gloom, but if they start bringing them down, it’s also doom and gloom. So where does that leave us poor homeowners and wanna-be property buyers?
We say, holding them steady for now, until the economy and markets stabilise a bit is probably the best anyone can do. It will give inflation a chance to decide what it wants to do, the economy the opportunity to see if it wants to enter a recession or stave it off still, and property pundits the opportunity to perhaps make a decision on whether they want to purchase a home and mortgage holders to work out whether they should refinance their home.
Australia’s housing market is the backbone of this nation’s economy, so we are vulnerable to interest rate movements. This is likely to be the case well into the future. In 2018, housing wealth represented 54 per cent of total wealth for Australians aged 60 to 99. This is set to increase to 66 per cent by 2048. So, understanding impacts of interest rates on borrowing capacity and housing affordability is in your best interests.
So, steady as she goes and let’s see what pops up on the horizon for now!
If you are interested in buying real estate in 2023, now is the time to get your budgets, finances and research in order. Plus, now is a great time to review and refinance your existing loans due to the rising interest rates. To understand more or how to maximise opportunities in the current climate reach out to the Pursue Wealth team. Click here to make a time to chat to your Adviser.
Source: The Age (13 January 2023), API Magazine (21 January 2023), The Australian Financial Review (30 January 2023), RBA Rate Announcement (4 April 2023)