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Ben Kingsley Blog post by Ben Kingsley

Rates on the Rise….?

I can understand why we are referred to as the ‘Lucky Country’.  Great climate, enough fertile land to produce food to support our population & provide a great quality of life and standard of living, stable government (well sort of) and the most important thing from an investors view point – an economy that has grown over the last 20 years.

Furthermore, we find ourselves incredibly well positioned geographically, as our Asian neighbours move through a period of huge economic upturn, needing our raw materials and primary production to assist in their journey.

 

What does all this mean for the average Australian?

Well, such growth has pushed our country up the list of the 20 developed countries and created enormous wealth for its citizens, especially over this last 20 year period.

The Reserve Bank of Australia and the role they play with monetary policy, needs to be congratulated in ensuring the economy has not overheated during this long term upswing. They have also become quite media savvy in providing regular commentary on their thoughts on where the economy is positioned and where monetary policy needs to be.

These early warning signals are helpful for allowing for the markets to prepare and manage their way through these events. We have seen what happens when monetary policies and financial markets get highly volatile—it’s called a Global Financial Crisis.

 

So how does higher rates, play out for us property investors?

Firstly, higher rates impact on borrowing power and affordability so we usually see an increase in rental demand.

Given there is already a very high supply shortage of housing, it’s a good bet to think rents are also going to increase as landlords pass on some of their increased costs in managing their property returns.  High rates also reduce competition for us investors in the market as it takes out some first home buyers and those looking to upsize.

So interesting times ahead and for those on variable interest rates, it might be a time to talk to our team about fixing some of your mortgage, as it a pretty good bet rise will rise moving forward, the question is when?

 

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