What The Recent Increase in Interest Rates Means for Home-owners

housing loans increase in interest rates

The RBA officially announced its much-anticipated rate hike on Tuesday, May 3rd. The increase in interest rates lifting the base cash rate from 0.10 to 0.35 percent, is the first since 2010.

What Does This Increase in Interest Rates Specifically Mean for Fraser Coast Hervey Bay Property Owners?

Unlike Sydney and Melbourne, where property markets are shifting into the red, Queensland continues to rise on the back of strong interstate demand as people continue to flock to the Sunshine State. An analysis of the SA3 regions with the largest annual growth in quarterly potential buyers reveals that interest in Queensland homes skyrocketed over the past 12 months and will not slow down despite the recent increase in interest rates.

No doubt the banks will almost certainly pass on the entire rate rise. In that instance, homeowners should expect a monthly payback increase of roughly $65 on a loan of $500,000. The average house loan size in June 2021, according to the ABS, was $555,964. It was $453,579 for first-time buyers. Hervey Bay property prices, like the rest of the country, have seen hefty increases over the last twelve months.

House & Land Packages. Turnkey Homes Scarcity.

New homes that less than two years ago cost little more than $350K no longer exist—  the exact same house and land package built today costs in excess of $450K; if you can get one, that is! The wait time for new builds in the region for many landowners is up to two years. Buyers will find new homes for sale in the area on property portals like, etc, but turnkey homes for sale are quite a rarity at the moment.

The government expected the building industry to assist in Australia’s economic recovery with Regional and Building Grants back in 2020, but with ongoing interruptions to the supply of essential building materials, the building industry has greatly slowed down. There have been band-aid solutions such as throwing $15-million at Kangaroo Island to extract timber more quickly, but if you remove all of the timber now, what’s the plan for the future? It’s certainly not sustainable and the current supply outlook isn’t looking too bright.

The Australian Forest Products Association warns that by 2035 Australia will be 250,000 house frames short of demand—  describing it as “A timber production shortfall equivalent to the combined size of Geelong and Newcastle.”

Increase in Interest rates new building
Building Supply Shortages + Increase in Interest Rates = Scarcity of New Builds

Established Second-Hand Homes Sky-Rocketing Prices

The new homes that Brian sold through Property Brokerage just two years ago have recently been resold as established (second-hand homes) for between $550K – $650K. The surge, Brian believes was unavoidable. “For a long time, the cash rate had been at record lows, and there was no way but up.” Most property purchasers, I believe, were aware that interest rates were anticipated to rise and had factored that in.”

Further increases are predicted, based on Reserve Bank of Australia Governor Philip Lowe’s strong statements. Higher-than-expected inflation rates and a strong labour market have warned that it’s time to leave the emergency lows behind.

“I believe it’s incredibly essential to remember this,” Brian adds. “Rising interest rates indicate that the economy is healthy and growing. The labour market is in excellent shape, with low and declining unemployment and pay gains beginning to emerge.”

How High Will Interest Rates Rise?

Nobody really knows without a crystal ball. However, most analysts predict a sequence of increases in the next years. Markets are pricing in a June increase as almost certain, with the consensus forecast calling for a 0.4 increase to yield a cash rate of 0.75.

With mortgage rates at an all-time high, few people expect major changes all at once; instead, the RBA is more likely to take a gradual approach that allows consumers time to adjust.

The NAB forecasts tiny consistent increases from the big banks over the following 24 months, peaking at 2.6 percent in mid-2024. ANZ believes the rate will rise over 3%, but not for a long time. A smaller hike, according to CBA, is more plausible, with four more tiny rises needed to lift the cash rate to 1.6 percent by February next year, followed by a plateau.

Why (Most) Homeowners Shouldn’t Be Concerned About Overall Interest Rates Australia Forecast

It depends on your circumstances, but for the most part, the increase will have little impact. Over the previous two years, Australian households have amassed a $250 billion savings account, owing in part to the fact that pandemic circumstances make spending more difficult.

Mr. Thompson reminds mortgage holders that the bank previously determined that they can withstand a big rate hike, but do be sure to look at your capacity to repay even if rates go up when you apply for a loan. Historically, banks have factored in a 2.5 percent interest rate increase, so if the interest rate provided on a loan is 3%, the bank looks to see whether you could still make your payments if the interest rate went to 5.5 percent.” APRA became even more cautious recently, requiring banks to boost their interest rate buffer to 3% over the quoted rate. So, even if interest rates continue to climb, most homeowners can rest assured that they will be able to pay their mortgage.”

However, keeping an eye on your budget is always a good idea. Examine your expenditures to determine if there’s anything you can eliminate to avoid future increases. Many times, you’ll discover that there are items you won’t miss, such as unused subscriptions or impulsive purchases. Make modest changes like taking your morning coffee from home to ensure you’re receiving the greatest value on utilities and insurance coverage.

Will Interest Rates Go Down? Maryborough Hervey Bay Mortgage Brokers May Assist to Secure a Low Interest Rate

A question on every home buyer’s lips is “Will interest rates go down and if so by how much and when”? It’s a tough question to answer. Chances are we will not see low interest rates like those we previously had, but the good news is that a knowledgeable mortgage broker has access to many different types of home loans including ones with a variable loan term of 10-, 15-, 20- & 25 year alternatives, flexible repayment amounts and/or weekly, fortnightly or monthly repayments as well as additional repayments without penalty. A mortgage broker is often better equipped to assist you by considering your specific needs.

It’s a good idea to check in with a mortgage broker or other finance professional if your house loan is more than a couple of years old. “Unfortunately, banks do not reward loyalty, so if you haven’t refinanced recently, you may not be getting the greatest rate,” Brian explains. “Schedule an appointment with a financial advisor or home loan consultant for a home loan health check as a professional mortgage broker may be able to save you money.”

They’ll see if you’re getting the best rate available and if adjusting the rate makes sense in your scenario. How? By taking a broad perspective of the items available and determining which ones will save you the most money. By being proactive about your house loan, you may take advantage of possibilities that can significantly improve your bottom line.”

Home Loan Health Check May Combat Recent Increase in Interest Rates

With interest rates and the cost of living rising, a health check on your home loan may be a good idea. There are many excellent mortgage brokers in the Hervey Bay & Maryborough area. Feel free to check out these best mortgage broker reviews on Localsearch Hervey Bay as you may find more affordable special offers such as a fixed rate loan or interest-only home loans.

Have a Hervey Bay or Maryborough Property you’d like to sell? We can help with our Pay on Success Guarantee. Get In Touch With Our No Risk No Sale No Fee Estate Agents

If you’d like to know more about our no sale no fee real estate offer or would like a free appraisal we’re here to help. Phone our office  directly on 07 4125 6692 or speak to senior broker sales manager Brian Thompson on 0438 132 215  for more information.

If you are looking to buy, check out our current homes for sale and land sales

You may also find these informative blog posts about buying and selling in Hervey Bay helpful.

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