How interest rates affect the market

Propertybuyer Blog
Property advice, market updates & more

By Rich Harvey, CEO, propertybuyer.com.au

If you're in the market to buy a house in Australia, chances are you already understand how interest rates affect how much you'll end up paying. However, you might not realise just how far-reaching the effects of an interest rate rise or fall can be.

Australian property values fluctuate with interest rates

When interest rates are low, it generally encourages prospective home buyers to enter the market. Since obtaining home finance is more affordable, those who may have been on the fence regarding the purchase of Australian property are more likely to take out a home loan and buy real estate.

In turn, this increase in demand for property leads to rising property values as inventory is scooped up and homes become more difficult to obtain.

Of course, the inverse is also true. When interest rates are high, consumers may be more unwilling to take out the mortgages they need in order to enter the property market. With fewer people looking to buy, the value of real estate stagnates or declines.

Interest rates are a major factor in property cycles, and for that reason it's important for potential home buyers to keep an eye on where interest rates are and where they may be heading.

Predicting the future

While trying to predict which way interest rates will move is far from a perfect science, there are strategies consumers can use.

In general, stronger economies tend to have higher interest rates, with lower rates used as a way to increase investment and eliminate a financial slowdown. In this way, staying apprised of general economic news and trends can help you determine whether interest rates are likely to rise or fall.

However, it's important to remember that interest rates are not the only factor that helps determine the cost and difficulty of purchasing real estate.

Everything from location to population trends can impact home prices and availability.

While interest rates an important factor, it's just as essential to work with a qualified buyer agent to streamline the process and ensure you make decisions that suit your needs.