skip to Main Content
Should You Buy A Home If Interest Rates Rise?

Interest rate rises – what will it mean for buyers?

I remember buying a property in early 2000’s when it was a hot market. Properties were being sold at auction and prices were high. Interest rates back then were at 6%. From that time up to about 2008, interest rates continued to rise until they reached almost 10% and the GFC occurred.

Back then I was of course worried whether I’d make the right decision buying, and also whether I’d still be able to cover the mortgage payments as interest rates rose. It meant tightening the budget to cover repayments, but also I knew fundamentally I’d bought in a strong capital growth suburb so would be safe if I took a long term approach. 

Impact of this first rate rise

This initial rate rise by the RBA is intended to help slow the economy as the rate of inflation is seen to be too high. Higher rates result in less money being spent in the economy and things slow down. It can also impact consumer confidence, particularly if additional rate rises are considered imminent. 

We are already seeing in some parts of the property market, that demand is cooling – in some areas (not all) properties are on the market for longer. The urgency that was experienced last year in securing a contract on a property in some areas has dissipated, which can create better buying conditions for those who are serious buyers.

This first rate rise may not necessarily lead to property prices dropping – it is largely considered that the impact of rate rises takes 6 – 12 months to really filter out in to the market. This may be because household savings levels are strong due to the COVID pandemic, and unemployment levels are low, which would buffer any initial rate rises. 

Should I buy in this market?

Whether it be your own home, or an investment property, the key to protecting value is buying in the right area and looking at your property as a long term investment. Back in those early 2000s I bought a property in an unappreciated area of inner city Brisbane (Woolloongabba) for what I thought back then was a lot. But I knew it had long term great growth potential so I held on to it throughout the market cycle and 10 years’ later is almost tripled in value. Make sure you do your research (or get someone like us to help) to ensure you’re buying in the very best area your budget can afford. 

Make sure you do your calculations as to what your loan repayments will be at the higher rates – and talk to your mortgage broker or lender. Ask them whether you can fix your rates to protect yourself from rate rises. And make sure you review your budget against higher rate scenarios to ensure you can still afford the repayments as well as your spending. 

If you need help making sure you are buying the right location, we’re always here to help:-)

Back To Top