The Reserve Bank of Australia (RBA) has announced today that it will lift interest rates to 0.35% for the first time in a decade.
RBA governor Phillip Lowe stated that “The Board judged that now was the right time to begin withdrawing some of the extraordinary monetary support that was put in place to help the Australian economy during the pandemic”.
He went on to say that "Given both the progress towards full ermployment and the evidence on prices and wages, some withdrawal of the extraordinary monetary support provided through the pandemic is appropriate”.
Whilst the increase in interest rates may pose difficulties for those who already own a property, it may be positive news for Australians who want to break into the property market.
This is because, the price of property is expected to fall as interest rates rise. If the prices of property fall as expected, this will make it easier for prospective property buyers to break into the market. Of course, they will still have the interest rates to contend with once they do enter the market.
Prior to the announcement, CoreLogic confirmed this prediction that, as interest rates rise, house prices will decline. CoreLogic’s research director Tim Lawless stated has said that “A larger fall of 20% could take national housing values back to similar levels as of June 2017, while a smaller 10% drop would see values at levels similar to June 2021 and a 5% drop back to September 2021 levels”.
This decision means that Australians will ultimately pay more on their mortgage each month. According to the Australian bureau of statistics, the amount of fixed rate loans taken out in Australia reached a peak last July when they were at 46%, but variable loans have since seen an increase. Whilst fixing the rate of your loan may mean increased peace of mind, those who are able to make many extra payments or who are thinking of selling may be better positioned for a variable rate.
This is the first time the RBA has raised interest rates since 2010, so it’s likely to be a shock for homeowners who have never experienced this rise. Meanwhile, this could be just the opportunity first home buyers have been waiting for.
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