Why the rise of interest rates is no reason to worry

The chief executive of Real Estate Industry of Queensland, Antonia Mercorella, stressed that the rate rises have been planned for, acknowledging that buyer behaviour is likely to adapt to these changing circumstances.

The increase to Australia’s cash rate handed down may have been larger and more swift than many first anticipated, however, commentators have been quick to assure that it will not rock home owners or house prices.

Real Estate Institute of Australia (REIA) president Hayden Groves said the cash rate increase would have modest impacts on affordability, as banks and mortgage holders have been preparing themselves for this scenario.

“If the cash rate rises to the 2.1 per cent forecast, the proportion of median income required will rise by 6.2 per cent, which most financial institutions would have already stress tested applicants for such rises,” Mr Groves said.

The chair of the Property Investment Professionals of Australia (PIPA) Nicola McDougall agreed that the cash rate adjustment was unlikely to impact the vast majority of borrowers.

“It’s important to understand that at 0.35 per cent, the cash rate is still below what was before the pandemic, and well below the 2.0 to 2.5 per cent it was throughout the majority of the Sydney property boom that ended about five years ago,” she said.

She further emphasised that borrowers had been assessed to accommodate interest rate rises of up to 3 per cent, stating that there was “no need to panic with most borrowers well-placed to finance moderate increases to mortgage repayments over the next two years”.

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