The RBA Rate Increase: How Will Property Investors Be Affected?

On the 1st of November, the Reserve Bank of Australia increased the official cash rate, once again. While this will have flow-on effects for a number of different industries, including the property investment market, it’s important to remember the bigger picture when building your ongoing property portfolio or entering the market for the first time.

Mortgage Rates

The most obvious way that an RBA rate increase will impact property owners is through mortgage rates. When the RBA raises rates, banks and other lenders will often follow suit by increasing their own interest rates. This means that those with variable rate mortgages can expect their repayments to go up.

For those who are looking to enter the property market, an RBA rate increase could make it more difficult to obtain finance. Lenders will often put stricter lending criteria in place when interest rates are on the rise, so it's important to speak to a good mortgage broker to see how you might be affected. Looking for a mortgage broker than specialises in investment properties? Ask one of our mentors to put you in contact with our preferred broker.

Property Prices

An RBA rate increase can also have an indirect impact on property prices. Interest rate rises are generally expected to lead to a slowdown in housing market activity. This is because potential buyers become more cautious and are less likely to enter into large financial commitments like buying a house. As a result, prices may soften as there is less demand from buyers.

Savvy investors will be keeping a close eye on how the market reacts to this news. While higher interest rates may put off some would-be investors, others see it as an opportunity to buy property while prices are still relatively low.

Rental Prices

Increased rates can go as far as motivate some more cautious investors to attempt to sell off their investment properties to avoid the increased mortgage repayments. This reduces the rental market as existing rental properties are potentially sold to buyers who want to live in them, and less new rental properties become available in a market with less investors.

Those investors who are weathering the rate increases could see increased demand for their properties in an increasingly small pool of supply. This increased demand can provide potentially higher rents to compensate for the interest rate rise or simply provide more suitable renters to care for your investment as their new home.

So, what should investors do?

While an RBA rate increase can have some negative impacts for property owners, it's important to remember that this is only one factor that can affect your portfolio; and in fact, the rate rise could also have flow-on positive impacts for your portfolio’s rental prospects.

So, if you're thinking of buying an investment property, it's a good idea to speak with one of our expert property mentors to see how you can make the current market conditions work best for your goals.

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