How the interest rate rise will effect home Buyers & Sellers

Over April’s five weekends the Real Estate Institute of Victoria (REIV) recorded more than 4,287 auctions. 2,660 properties sold. 1,975 at auction, with 872 passed in. 682 properties were sold before auction & 3 properties were sold after auction. The clearance rate was 76.25%, slightly down on March’s 78.25%.

The market was solid across April with high demand, a high clearance rate and a feeling that home values had plateaued.

First rate rise in 11 years

The sands shifted this week when the Reserve Bank lifted the official cash rate from 0.1% to 0.35%, to try and counter racing inflation.

What’s happening is the Reserve Bank is withdrawing some of the extra monetary support it put in place to get the Australian economy through the pandemic. In fact the economy turned out to be very resilient and this has caused inflation to pick up more quickly than expected.

But interest rate rises put downward pressure on buyer confidence, with existing and new borrowers having to adjust to higher monthly mortgage repayments. Banks had been predicting continued rising values for homes across 2022 but with the likelihood of more interest rate rises that idea is evaporating fast. AMP for example predicts Australian house prices may fall from here by 10 to 15% by 2024.

How much will the rate rise effect home buyers?

If you’re in the market to buy a house in Australia, chances are you already understand how interest rates affect how much you’ll end up paying. However, you might not realise just how far-reaching the effects of an interest rate rise or fall can be.

Although rates are predicted to continue rising incrementally, the impact to buyers’ borrowing power may only be marginal to begin with.

For exampe under the new rate, the monthly repayment on a $600,000 home loan would rise ro $2,324, a increase of $74.

When banks approve home loan applications, they assess borrowers’ ability to repay their home loans at an interest rate several percentage points higher than the mortgage rate, known as the assessment rate.

How much will the rate rise effect home sellers?

Exactly how much the RBA’s move affects home values in Melbourne will be revealed by sales results across the next few months.

But home sellers or upgraders wont be disadvantaged if they make the right moves. With Vendor Marketing helping to navigate your sale you’re certainly in the strongest position to get that all important maximum sale price.

Recent Posts

Find Out More...

Contact us to find out more about our services. We offer a complimentary 30 minute phone consultation.