Interest rates on the rise by the Big 4. Should you be worried?

ByAndrew Mirams

We hope you are enjoying the beautiful spring weather and backed the winner on the Melbourne Cup last week! It’s hard to get down to business with so many festivities going on – but spring is traditionally the busiest time of year in property markets around the country and this year is no exception!

Many analysts were predicting a rate cut in November, however the Reserve Bank of Australia (RBA) have elected to keep the official cash rate on hold at 2.0 per cent for another month.

This is the sixth month in a row that the RBA has kept rates on hold after cutting rates to historically low levels in February and May this year. This extended period of stability on interest rates is having a positive effect on our economy, with the Australian dollar mostly holding at a more acceptable level and boosting our tourism and export markets. Employment is also growing and consumer spending is improving.

Home loan interest rates have been on the move during October, despite the RBA keeping the cash rate on hold. These interest rate movements were initiated by the big four banks largely to protect their shareholder’s interests, with rate rises following from many other lenders.

The rapid rises in home values that we have been seeing in Melbourne and Sydney are finally starting to slow in response to the upward movement in rates and the changes in investor lending regulations by APRA coming into effect over the last six months. This is good news if you’ve been struggling to get your deposit together for your first home or a property investment.

Home values in Sydney only increased by 0.28 per cent during October. Melbourne home values increased by 0.64 per cent and Brisbane/Gold Coast improved by 0.16 per cent. In Adelaide home values rose by 1.47 per cent, in Canberra they rose by 1.48 per cent and in Hobart 1.44 per cent.

Only Perth and Darwin showed declines. Home values in Perth fell by 2.76 per cent in October and by a marginal 0.13 per cent in Darwin.

The number of properties on the market is currently quite high – as is to be expected for this time of year. Auction numbers were up in most states last month, however it should be noted that private sales are now becoming more popular than auctions in Western Australia and the Northern Territory. Auction clearance rates were down across the board, indicating that there may be less competition and buyers may be more discerning about property prices.

The table below shows the relevant auction numbers for each state and corresponding clearance rates, for the week ending Sunday 1 November:
Interest rates

If your bank increased your home loan interest rate last month, then it may be a good time to give us a call to get a home loan health check. Not all lenders have increased their rates, and some have increased them less than others, so we can shop around to get the right deal for you. We can also access some great rates for property investors and first home buyers, so if you’d like to check what home loan options are available for you then please don’t hesitate to give us a call today.

The information provided in this newsletter is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.

Information sources: Auction results: www.realestate.com.au Home values: www.corelogic.com.au

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Andrew Mirams
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