The Upside to the Downside of the Rate Rise

Since mid-2022, we’ve heard a lot about the dreaded rate rises, and while increasing interest rates are synonymous with higher loan repayments, there are benefits to buying direct property now. Rising interest rates result in a cooling down of asset prices including property.

Whether you’re a first home buyer or investor, let us introduce you to a discussion on the upside of investing during a downturn.

Knowing when to buy is the million-dollar question, quite literally! While people speculate about what the market is going to do, and try to predict the most timely choice, in all honesty, there really is no perfect time to buy. In the history of property, there has never been a perfect time to buy as the market ebbs and flows, in its irregularly consistent way.

More pertinent to trying to predict when to invest and how much to borrow is understanding your individual situation. Ask yourself questions like “what’s my borrowing capacity?”, “What’s my maximum possible spend for loan repayments?”, “is my income changing anytime soon” will be far more valuable in helping you make the right choice for you.

Second, and to discuss the blindingly obvious, whether loan interest rates are high or low, buying property will always cost money. As long as you’ve accounted for rising interest rates in your budget and have a sufficient deposit, there is no reason to hold off. With the support of a financial advisor or qualified mortgage broker, you will be able to better understand your living expenses, what you can afford to buy, and what your repayments might look like.


The Benefits Of Buying During A Rate Rise
Now, we did promise to share the benefits of buying during a rise, and there are three key ones to take note of:

1. Rates might go up, but housing prices often go down.
When rates were at their lowest, demand skyrocketed as the number of people able to secure large loans spiked. As the rates rose however, the number of people eligible for the same type of loan decreased.
The result – a less competitive market. To explain, as more people are pushed out of the market, remaining buyers have a higher chance of securing a property.

2. When rates go up, prices go down.
Stemming from the first benefit, when there’s less competition and tighter borrowing capacity, prices are more likely to plateau. When there’s less flexibility in a budget, people are less likely to outbid each other and tend to stay on the conservative side.

With downward pressure on housing prices, you might get your dream property a little more easily.

3. Keep an eye on the Inventory.
With properties selling slowly, there is more on the market, meaning more choice for you. When rates were low, properties were selling like hot soup on a cold day! and a listed property would be lucky to stay on the market for a few days.

With less demand, there’s more choice. Properties are on the market longer, giving you more choice and time to find the best fit for you. If you’re an investor, you may also benefit from paying fewer taxes if the repayments against your asset increase.

While there are many benefits to buying now, it’s always best to speak with a specialist team to understand your individual situation and goals. To start your property journey, speak with our specialist team today.

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