What is the Right Time to Buy a House in Terms of Interest Rates?

What is the Right Time to Buy a House in Terms of Interest Rates?

Being in the mortgage business for quite some time, we have observed something interesting! Whenever someone has ventured into the market to buy a house in Australia with the lowest home loan rates, the person already understands how interest rates affect and how much he or she will end up paying. However, you might not realise just how far-reaching the effects of an interest rate rise or fall can be.

Property Values Fluctuate with Interest Rates

Low-interest rates usually encourage prospective home buyers to enter the market. As obtaining home finance is more affordable, people who are on the fence regarding the purchase of Australian property are more possibly to apply for a home loan and buy real estate.

Our experience is that this gradual increase in demand for property leads to rising property values. The reason is inventory is scooped up and homes become more challenging to obtain.

At times, the inverse is also true. If interest rates are high, consumers may feel more disinterested in taking out mortgages as they are required to enter the property market. As fewer people seek to purchase, the value of real estate becomes stagnant or declines.

We find that Interest rates are a crucial factor in property cycles. That’s why potential home buyers need to monitor the interest rates and keep a track of where they may be heading.

Predicting the Future

Even when we help our clients with the best commercial property loans, we find that trying to forecast which way interest rates will be heading is far from perfect science. Home loans aren’t an exception. There are strategies for consumers to use.

Usually, stronger economies tend to have higher interest rates. Lower rates are used as a method to increase investment and eliminate a financial slowdown. In this manner, staying informed about general business and economic news and trends can help you decide whether interest rates are likely to rise or fall.

But it’s important to remember that interest rates are not the sole factor to determine the cost and difficulty of buying real estate.

Every other parameter from location to demographic trends can impact home prices and availability. Though interest rates are a significant factor, it’s equally necessary to collaborate with a qualified buyer agent like us to streamline the process. This will ensure that you make decisions to suit your needs.

Benefits of Higher Interest Rates

Australians seeking to purchase a new house could immensely benefit from rising interest rates. The reason is that they sufficiently lower the cost of housing to ultimately lead to lower mortgage payments than they would otherwise face. This was the opinion of a top central banker.

According to Jonathan Kearn, Assistant Governor of the Reserve Bank of Australia (RBA), the 225 basis points of rate hikes already delivered could reduce prices by at least 15 percent over two years. It will also cut down the maximum loan size of the borrowers by nearly 20 percent. He was recently speaking at a housing conference. As per estimates, the net effect is that mortgage payments for new buyers would be higher for approximately two years due to higher interest rates.

However, after that, the declines in housing prices and mortgage size will start dominating. It suggests that as higher interest rates reduce housing prices, so mortgage sizes and mortgage payments for new borrowers could ultimately be lower comparatively if interest rates had not increased.

The central bank has faced a lot of criticism for lifting rates. They did so for five successive months to 2.35%, having last year’s forecast that rates were unlikely to rise until 2024.

According to the latest data from property consultant CoreLogic, the housing market has cooled rapidly as prices nationally sank 1.6% in July from June.

That was the highest monthly drop since 1983. The dragged annual price growth is down to 4.7%, compared to a peak above 21% the late previous year.

According to experts, almost 35 percent of housing credit is fixed-rate debt. The borrowers would not face an increase in their interest expenses and loan payments until the expiry of that fixed rate, possibly from next year onwards.

There were several factors other than interest rates that affected house prices, including income growth, migration, and building costs.


So, we can summarize that higher interest rates will tend to depress residential and commercial property prices. However, there is considerable unpredictability about the magnitude as well as the timing. Whenever you apply for any of the best online home loans in Australia, you must remember that rising interest rates affect home affordability for buyers by increasing the monthly mortgage payment. Regardless of how it seems, there are advantages to buying if interest rates rise. So, whenever there’s a hike in interest rates, feel free to get in touch with us. Don’t forget that less buyer competition forces home sales prices down. It opens up more options for buyers and can minimize buyer risk.


Get answers fast! Start here

Contact our expert broker today