Many homeowners are feeling the pinch of the Reserve Bank of Australia’s (RBA) increased cash rate, which has been raised for the eighth month in a row. The most recent increase, from 2.85% to 3.1%, was made in the RBA’s final meeting of 2022, as part of its ongoing effort to cool rising inflation.
The new cash rate is 3% higher than the start of the year, which means that many borrowers will experience higher repayments as they service their loans. However, there are reasons why this may be a good opportunity for first-home buyers to enter the property market.
One reason is falling property prices, with houses in some areas of Sydney and Melbourne dropping in value by up to 25% and nearly 15%, respectively, over the last year. This may make homes more affordable than they were a year ago and indicates that we are moving towards, if not already in, a buyer’s market.
Another reason is the increasing rental prices in Australia. Australians are experiencing the longest period of rental price growth on record, with national annual changes up to 12.8%, and Brisbane experiencing the highest increase at 22%. By purchasing your own home, you become your own landlord and get out of the rising-rate environment.
Moreover, economists predict a flattening of interest rates with a projected peak ranging from 3.1% to 3.85% at some stage in 2023. This means that first-home buyers are unlikely to experience the same turbulence as homeowners did in 2022, and the stress test applied to loan applications should remain within your “comfort” range on repayments.
Lastly, the rising cash rate has also led to an increase in interest rates on savings accounts, which is good news for people saving for a deposit to purchase property. Combined with the decreasing property prices, buyers are in a better position to get onto the property ladder.
If you’re planning on buying property, a mortgage broker can help get your finances in order and understand your borrowing power, so you can bid with confidence.
Get in touch with our team of experts and head on to https://qmpfinancial.com.au/ today to learn more!