The Reserve Bank has increased interest rates by 50 basis points to 85 basis points. Predictions are that interest rates will only continue to rise this year before reaching a peak by the end of 2023.
The most recent rate rise will see approximately $133 a month added to a loan worth $500,000 over twenty-five years. Loans worth $1 million will see an added $265 a month.
Whilst this increase in interest rates has led to a decrease in property prices, a hopeful prospect for first home buyers, it also means that buyers will face increased interest on mortgages.
It also means that buyers may not be able to borrow as much as they once could.
For buyers looking to purchase quality property at an affordable price amidst the current economic climate, buying off-the-plan property could offer a solution. With many apartments offering house-like proportions and open floorplans, buyers may avoid compromising on space at all.
In addition, some states offer initiatives for off-the-plan homebuyers. The Victorian Homebuyer Fund, for example, allows you to purchase a home with just a 5% deposit. The Victorian Government then contributes an additional 25% of the purchase price, in exchange for an equivalent share in the property,
Some states also offer stamp duty concessions for off-the-plan buyers, allowing buyers to purchase property at a lower price than if they were to buy a fully constructed apartment.
Reserve Bank governor Philip Lowe has stated that inflation is expected to increase further in order to withdraw the “extraordinary monetary support that was put in place to help the Australian economy during the pandemic”.
“Today’s increase in interest rates will assist with the return of inflation to target over time”, Dr Lowe stated.
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