BUYING A HOME THIS YEAR? Here’s what you’ll want to know.

Credit standards, cash rates, interest hikes, percentage points, debt-to-income ratios… there’s an awful lot of fluffy terms to swallow this year if you’re in the market to buy a home. 

So what’s the kerfuffle?

Rising interest rates are unquestionably the culprit, following the Reserve Bank’s earth-shattering decision last month to raise interest rates for the first time in almost a decade. 

It’s not all bad news though, and certainly a benefit to those watching the growth of their hard-earned pennies. After all, rising interest rates leads to greater returns on savings (and on super), both of which earn interest on growth.

However, it’s the other side of rate rises that’s the topic of real estate conversations today; if raising interest rates also makes borrowing money more expensive, what will that mean for the property market moving forward – and for the borrowing power of buyers?

To determine that, Canstar have done the modelling; property prices would need to fall by at least 20%, before first home buyers would start to get ahead, because of their reduced borrowing capacity.

That’s to say, as interest rates rise, the market may likely see a downturn in property prices – but borrowing power is set to decrease drastically, too.

So what should homebuyers do?

As sharp as it may seem coming from your local agent, the reality is that buying in the current season could save you some serious wallet stress into the future. 

As more interest rate hikes are likely to occur over the coming months, home seekers may find that the ‘sweet spot’ for buying is right now. That’s because there’s still good home loan deals going between lenders, which are forecast to become more expensive further into the year, resulting in higher home loan repayments.

But it’s also because property prices have fallen from their peak in South West Sydney, particularly in Campbelltown. So, some buyers may discover that this month is an ideal time to find a property that’s better priced – while also still having the borrowing power to purchase it. 

In the perspective of AMP Capital chief economist Dr Shane Oliver, buyers set on waiting may be disappointed with what they can borrow later into the year, or potentially risk missing out on a home altogether.

“New buyers are ending up with far less capacity to pay than a year ago, and that’s even though we’ve only seen one move by the RBA. I think the impact will show up a lot faster [as a result].”

The bottom line

Purchasing a property as interest rates rise is nothing to be alarmed about; it’s entirely possible to lock in a great home and mortgage in the current climate.

However, it pays to know someone to guide you. In every real estate market cycle, there’s key takeaways and advantages to jump on, which could save you stress and money down the track. A seasoned real estate agent can point you in the right direction, helping you determine if buying right now is the best decision for you.

For more information and advice, get in touch with your local Prudential Real Estate office below for a friendly, no-obligation chat.

Prudential Real Estate Campbelltown | (02) 4628 0033 |

Prudential Real Estate Liverpool | (02) 9822 5999 |

Prudential Real Estate Macquarie Fields |  (02) 9605 5333 |

Prudential Real Estate Narellan | (02) 4624 4400 |