Reserve Bank of Australia has raised the cash rate by 25 basis points for the sixth consecutive month. The increase from 0.10 percent in April to 2,60 percent in October is a result of the RBA’s latest move. The rising rates have increased the repayment burden for borrowers. Higher interest rates are also affecting property values. House prices are falling faster each month. Consumer confidence has been shattered by the expectation that this trend will continue.
What is the effect of the cash rate hike on my monthly repayment?
This chart compares the monthly repayments made before and after the latest cash rate increase. These example loan repayments are based on our repayment calculator and the lowest variable rate that we offer for 30 years as of October 4, 2022. Rates may change after this date.
In September, the rate of decline in housing values eased slightly
The chart below compares the rate at which housing values declined in August and September. The rate of decline was reduced somewhat in September. This may indicate that the housing market is beginning to recover.
Rate hikes Could Reduce Repayments Over Time.
Jonathan Kearns is the RBA’s director of domestic markets. He told the Australian Financial Review Property Summit 2022 that a 200 basis-point rise in interest rates would lower real house prices by around 15% over the next two years. National Australia Bank forecasts a 20 percent drop in home prices across the country next year. First-time home buyers can take advantage of this opportunity to save money and buy a cheaper house.
Once inflation has stabilized, the RBA will likely lower its cash rate. Your monthly repayments will shrink once this occurs. You will get a better price and interest rate if you are able to pay your monthly payments now.
Now, Expensive Property is More Affordably Priced
Kearns, the RBA’s Kearns, says that premium properties are most sensitive to changes in interest rates. CoreLogic reports that prices of houses and apartments in the top quartile suburbs fell 6.2 percent nationally since their peak in April. Sydney’s top quartile has seen a 10.3% drop in house prices since their peak. Luxury homes and large properties in high-end suburbs dominate auctions. Potential buyers who couldn’t afford expensive properties in the past could take advantage of this opportunity. When prices are dropping, you can make your dream of owning a luxury property in a high-end suburb a reality. You should start searching if you earn a lot of money and can afford the monthly payments.
When should I buy the property?
You could lose money if you wait too long to make a purchase.
- You may miss out on the chance to buy your dream home
- Don’t miss out on the property market decline
- You will soon be priced out of the properties you can now afford