How Rising Interest Rates Can Influence Real Estate Markets

After a period where Australians could get a home loan for the lowest rates ever available, interest rates are now rising steadily. The reason they are going up is to try and stave off a recession and to try and limit inflation through our wider economy.

So how does this affect the real estate market?

Rising interest rates can be viewed from a number of different angles, depending on your position. For a buyer in the market, they might be nervous about ongoing affordability. Buyers might be worried that they have missed the boat and that there are fewer buyers than before. Investors might be trying to get a new Property Today, while the competition to buy is a little lower.

For Buyers

If you are thinking of buying a home, especially your first home, it might be better to get in now, rather than later. Yes, interest rates are rising, but it is quite a normal cycle after the low rates we have had. 

When you step back and look at it from a wider view, interest rates are still very low. It’s just that they are not rock bottom anymore.

The thing is, interest rates are predicted to continue rising. What this will mean is that your borrowing capacity will come down, with each official rate rise. Banks in Australia generally stress test new home loans at about a 5% higher rate than what they approve a loan for. So if you have approval, the banks know that you can afford the loan, at a rate 5 percentage points higher than they give you.

The longer you wait, the lower your borrowing capacity may be. That means a home you can afford today, might be out of reach in six months. 

For Sellers

It is true that on the Sunshine Coast, the peak level of buyers has passed. There are however still plenty of buyers on the market. Similar to above, your home is more affordable to more people today, than it may be in six months if interest rates continue to rise. 

If you are selling with the intention to buy another home, then you are just moving sideways in the market, which is fine. It might be better to do that now, while the market is still definitely strong, rather than wait. The number of active buyers could continue to decline, especially after the approaching summer.

If you would like to have a no-obligation chat to a real estate agent in Maroochydore or the surrounding suburbs, then why not contact me today. I offer honest opinions and work very hard to help my clients get the best outcome from selling their home as I can.

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Jamie Hill

Jamie Hill is a trusted real estate agent in Buderim, offering honest property appraisals and personalised services with over 26 years of sales experience, guiding clients from appraisal to settlement seamlessly.

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