The Rising Interest Rate Environment | Zippy Financial

In recent times, the global financial landscape has been characterized by rising interest rates, a trend that has significant implications for economies and individuals alike. Understanding the factors behind these interest rate rises and their impact is crucial for effective financial planning.

Global Economic Factors Influencing Interest Rates

The current scenario of rising interest rates is largely driven by global economic factors. Inflationary pressures, geopolitical tensions, and the ongoing recovery from the pandemic have all played a role. These elements have led to a tightening of monetary policies by central banks worldwide, contributing to the rising interest rate environment.

Impact on Australian Interest Rates

Australia’s financial system is not immune to these global trends. The Reserve Bank of Australia (RBA) has responded to international funding costs and global economic pressures, leading to adjustments in domestic interest rates. These changes are particularly noticeable in the housing market and consumer lending.

The Role of Regulatory Bodies

Regulatory bodies like the Australian Prudential Regulation Authority (APRA) significantly influence interest rates. Their measures to ensure financial stability often result in changes to lending rates and borrowing costs. These regulations aim to create a balance between economic growth and financial risk management.

The Influence of Political and Economic Policies

Political decisions and economic policies, both within Australia and internationally, have a direct impact on interest rates. Trade policies, government spending, and other macroeconomic factors play a crucial role in shaping the interest rate landscape.

The Impact on Borrowers and the Housing Market

Rising interest rates have a direct impact on borrowers, especially in the housing market. Homeowners and potential buyers face higher mortgage costs, making it essential to understand and navigate these changes. Strategies such as refinancing and budgeting become crucial in managing the effects of rising interest rates.

Future Projections and Trends

Looking ahead, experts project that interest rates may continue to rise, albeit at varying rates depending on economic conditions. These projections are crucial for borrowers, investors, and policymakers, especially those involved in investment property, to understand potential future scenarios and prepare accordingly.

Navigating the Rising Interest Rate Environment

In this environment, individuals and businesses must be proactive in managing their finances. Refinancing loans, adjusting budgets, and seeking professional financial advice, including consulting a mortgage broker, are key strategies to mitigate the impact of rising interest rates.

The rising interest rate environment presents challenges and opportunities. By staying informed and adaptable, individuals and businesses can navigate these changes effectively. Understanding the factors driving interest rate rises is essential for making informed financial decisions in this evolving landscape.

FAQ

A: Rising interest rates are largely driven by global economic factors such as inflationary pressures, geopolitical tensions, and the ongoing recovery from the pandemic.

A: Australia’s financial system is affected by global trends, with the Reserve Bank of Australia (RBA) responding to international funding costs and global economic pressures, leading to adjustments in domestic interest rates.

A: Regulatory bodies like the Australian Prudential Regulation Authority (APRA) significantly influence interest rates through measures aimed at ensuring financial stability.

A: Political decisions and economic policies, both within Australia and internationally, directly impact interest rates through trade policies, government spending, and other macroeconomic factors.

A: Rising interest rates directly impact borrowers, especially in the housing market, leading to higher mortgage costs and necessitating strategies like refinancing and budgeting.

A: Experts project that interest rates may continue to rise, albeit at varying rates depending on economic conditions.

Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilizes her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether business, health or financial.

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Australia’s housing market is making a bigger comeback than Barbie.

Despite interest rates rising 4% in a year and a cost of living crunch, home values have skyrocketed with prices soaring 4.9% nationally since March 2023.

The strength of the rebound has wiped out about half the losses recorded in the downturn between April 2022 and February 2023, when home values fell 9.1%. In fact, the value of Australia’s housing market just hit $10 trillion again – the first time the total estimated value hit double digits since June 2022.

What is driving home prices higher?

CoreLogic says three factors are pushing up property values:

Net overseas migration:

more people are arriving from overseas than are leaving. That is a lot of extra people looking for a place to live.

Use of savings, profit, and equity:

upgraders are using savings, equity, or profits from their home to buy their next place instead of borrowing more. This has seen demand for property stay strong even though rates have climbed higher.

Tight supply:

the volume of homes listed for sale is a lot lower than in previous years. That spells competition between buyers, which is putting pressure on prices.

Will property prices keep rising?

Home values have been rising steadily. What happens from here hinges on how interest rates move, and whether the economy stays in good shape.

As a guide, CoreLogic is expecting some heat to come out of the market recovery by the end of 2023.

That is great news for home buyers and mortgage brokers if cooler prices are not the result of more rate hikes or a sluggish economy.

How do you get ready to buy your next home?

In today’s environment of rapidly rising home values, home buyers can score a winning edge by having their ducks in a row before inspecting homes listed for sale.

This increasing need to be organised is one of the key reasons why 67% of Australians turn to a mortgage broker for expert support when they buy their home.

According to research by Helia, prospective home buyers are getting support in the areas of:

Determining their borrowing power – 63% of those surveyed
Help to choose the right loan – 60% of those surveyed
Getting a home loan pre-approved – 56% of those surveyed
Applying for a loan – 55% of those surveyed

If you would like help in any of these areas, or you want to get into the market before prices rise further, call us to explore your home loan options.

Why is the real estate market soaring?

Various factors contribute to the soaring real estate market, including low-interest rates, increased demand, and limited supply. The article provides a detailed analysis of these driving forces.

How do low-interest rates impact the real estate market?

Low-interest rates make borrowing cheaper, encouraging more people to take out mortgages and invest in real estate. This increased demand can drive up property prices.

Is the surge in the real estate market a short-term trend?

Predicting the long-term trajectory of the real estate market is complex and depends on various economic and external factors.

How does limited supply contribute to the rise in property prices?

When there’s limited supply and high demand, property prices tend to increase. Fewer properties available in the market can lead to competitive bidding, pushing prices higher.

Are there any risks associated with the soaring real estate market?

Soaring real estate prices can pose risks such as property bubbles and affordability issues for first-time buyers.

How can potential buyers navigate the soaring real estate market?

Buyers should stay informed about market trends, consider their financial position, and seek expert advice before making any investment decisions.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

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Are We Witnessing a Resurgence in the Property Market?

Navigating the Australian property market over the last year has felt like standing on shifting sands, but is the market starting to regain stability? And if so, what can you do now to make sure you are ready to buy?

Anyone with an eye on the property and finance market over the past few years has seen their fair share of thrills and spills. It has been anything but eventful. But with the RBA’s rapid-fire hikes slated to peak in 2023, is there a property upswing afoot?

Westpac’s economists seem to think so as they are predicting that the housing correction is winding down. The bank forecasts that Australian property prices will grow by 5% in 2024 after stabilising throughout 2023.

The Big Four Banks’ Cash Rate Predictions

There are Other Benefits Too

The RBA raised the cash rate to 3.85% in May 2023. Understandably this has made some would-be buyers gun-shy when it comes to pulling the trigger on applying for a home loan and buying a house. But Australia’s four major banks have topped that 2023/2024 could see the cash rate start to decline.

Here is what they are predicting:

CBA: peak of 3.85% reached and will drop to 2.60% by August 2024.
Westpac: peak of 3.85% reached and will drop to 2.10% by May 2025.
NAB: peak of 3.85% reached and will drop again in 2024.
ANZ: peak of 4.10% by August 2023 and then will drop to 3.85% by November 2024.

So whichever financial institution you choose to listen to, it looks like we have either reached the cash rate peak or are very close to it. And what goes up must (hopefully) come down.

Property Prices Are Back on the Move

In 2022 we saw national property prices take a small, but not insignificant, hit. In response, sellers started waiting it out for a better price, creating a slim-picking situation for house hunters.

However, Property Investment Professionals of Australia (PIPA) chair Nicola McDougall has stated that property prices look to be stabilising, partly due to the low volume of housing stock for sale.

Meanwhile, CoreLogic data shows that the three months to April marked the first quarterly boost to national property values since this time last year, with a 1% rise.

Why is this good news if you are looking to buy? Well, hopefully you’ll soon have more suitable housing options to choose from as owners start to list again. And with interest rates predicted to decline in 2023/2024, getting prepared now could put you in good stead to buy when the time is right.

What does the RBA’s cash rate mean for homebuyers?

The RBA’s cash rate influences the interest rates offered by banks. A higher cash rate generally means higher interest rates for home loans, while a lower rate could lead to cheaper loans.

How reliable are the cash rate predictions from the Big Four Banks?

While the predictions from Australia’s Big Four Banks are based on extensive research and market analysis, they are still subject to change due to various economic factors. Always consult multiple sources and consider your personal financial situation.

What impact do property prices have on homebuyers?

Rising property prices can make it more challenging for new buyers to enter the market but can benefit those who already own property. Conversely, falling prices can present buying opportunities but may negatively impact current homeowners.

How can first-home buyers benefit from government schemes?

Government schemes like low deposit and no lenders mortgage insurance programs can help first-home buyers enter the market sooner by reducing upfront costs.

What should I do to prepare for a property purchase?

Preparing for a property purchase involves multiple steps, including saving for a deposit, getting pre-approved for a loan, and researching the property market. Consulting a mortgage broker can provide personalized advice tailored to your needs.

Is now a good time to buy property in Australia?

The “right time” to buy property varies depending on individual circumstances and market conditions. With interest rates predicted to decline in the coming years and property prices stabilizing, now could be a favorable time for some buyers. Read more about this article here: https://zippyfinancial.com.au/best-time-to-buy-property-in-australia/

How can Zippy Financial assist me in navigating the property market?

Zippy Financial offers expert mortgage brokerage services, helping you find the best loan options, get pre-approved, and navigate the complexities of the property market.

Give Us a Call Today

With all the above in mind, getting your pre-approved finance in place now could have you primed to pounce on your ideal home ahead of the next property market upswing.

If you don’t think your deposit is quite there yet, keep in mind that a new round of federal government’s low deposit, no lenders mortgage insurance schemes are set to become available from the 1st of July, which can help first-home buyers, regional buyers and single parents crack the market 5 years sooner (on average).

If you would like to find out more, get in touch today and we can run you through your options and help arrange your finances.

Phone: 1300 855 022

Email: clientservices@zippyfinancial.com.au

Zippy Financial is an award-winning mortgage brokerage specialising in home loans, property investment, commercial lending, and vehicle & asset finance. Whether you are looking to buy your first home, refinance or build your property investment portfolio, the team at Zippy Financial can help find and secure the right loan for you and your business.

About the Author:

Louisa Sanghera is an award-winning mortgage broker and Director at Zippy Financial. Louisa founded Zippy Financial with the goal of helping clients grow their wealth through smart property and business financing. Louisa utilises her expert financial knowledge, vision for exceptional customer service and passion for property to help her clients achieve their lifestyle and financial goals. Louisa is an experienced speaker, financial commentator, mortgage broker industry representative and small business advocate.

Connect with Louisa on Linkedin.

Louisa Sanghera is a Credit Representative (437236) of Mortgage Specialists Pty Ltd (Australian Credit Licence No. 387025).

Global Economic Factors Influencing Interest Rates

Impact on Australian Interest Rates

The Role of Regulatory Bodies

The Influence of Political and Economic Policies

The Impact on Borrowers and the Housing Market

Future Projections and Trends

Navigating the Rising Interest Rate Environment

FAQ

About the Author:

RELATED ARTICLES

The Real Estate Market Soars Towards Record Highs

Despite interest rates rising 4% in a year and a cost of living crunch, home values have skyrocketed with prices soaring 4.9% nationally since March 2023.

What is driving home prices higher?

Net overseas migration:

Use of savings, profit, and equity:

Tight supply:

Will property prices keep rising?

How do you get ready to buy your next home?

Frequently Asked Questions

Why is the real estate market soaring?

How do low-interest rates impact the real estate market?

Is the surge in the real estate market a short-term trend?

How does limited supply contribute to the rise in property prices?

Are there any risks associated with the soaring real estate market?

How can potential buyers navigate the soaring real estate market?

RELATED ARTICLES

SERVICE LOCATIONS

Are We Witnessing a Resurgence in the Property Market?

The Big Four Banks’ Cash Rate Predictions

There are Other Benefits Too

Property Prices Are Back on the Move

Frequently Asked Questions

What does the RBA’s cash rate mean for homebuyers?

How reliable are the cash rate predictions from the Big Four Banks?

What impact do property prices have on homebuyers?

How can first-home buyers benefit from government schemes?

What should I do to prepare for a property purchase?

Is now a good time to buy property in Australia?

How can Zippy Financial assist me in navigating the property market?

Give Us a Call Today

RELATED ARTICLES

SERVICE LOCATIONS