Etairos Accounting and Finance
we guide you to a better future
Etairos Accounting and Finance
Strength in Numbers
Interested to know how an SMSF
can work for your future?
Are you looking for something better from your
Accounting and Finance experience?

Rising rates hit property investors

Added on by

National Australia Bank (NAB) announced it will raise its standard variable mortgage rate by 25 basis points to 5.8 per cent for property investors and by seven points for owner-occupiers to 5.32 per cent. The increased rates are due to take effect next Friday. 

Speaking earlier this week, RBA assistant governor Michele Bullock said Australia’s regulatory bodies, including APRA, ASIC, and the Treasury, are watching rising house prices "very carefully”.

Australia’s hot property markets, particularly Sydney, are of particular concern having just experienced a pickup in January. "We're focused on whether things might be procyclical and whether or not there are implications for the resilience of household balance sheets and banking balance sheets as well," Ms Bullock said.

The 25 basis point hike by the US Reserve, the second for the year, had been anticipated as the US appears to be on track to achieve its inflation target, and may continue to put pressure on bank interest rates in Australia. The Fed refrained from incorporating an additional easing of financial conditions into their outlook going forward. Nonetheless, financial conditions will likely continue to be an important part of the Fed’s actions this year.

US Rates increased in 2015 the first in a decade, then one in 2016, and now two in 2017, seem to cement the broad anticipation that global growth may be on the way, leaving some of the commentary to think that there is still potential the Fed will surprise the market, pushing rates even higher than expected.

The Reserve Bank of Australia is still sensitive to local conditions which remain subdued. They'll welcome a fall in the value of the Australian Currency that higher US rates will bring so won't be too quick to increase the cash rate here. However, given their concern about an overheated property market, they'll welcome out of cycle rate hikes from local banks without too much noise.

Given that Australian banks are still funded around 40 per cent from overseas borrowings it's probably safe to conclude we're at the bottom of the current rate cycle and should expect to see a spike in the use of medium term fixed rate loan products while the cheaper rates last.

If you have a investment or other mortgage, now might be the right time to review your rate and see if a fixed rate product might be advantageous to your circumstances. 

Call our lending staff and discuss your situation. 

Latest from the blog

7 Tips for first home buyers 12 February 2018

  Buying your first property can be an overwhelming process. First time borrowers often face uncertainty over how to apply for a home loan, how... READ MORE

9 Tips for getting started in property investment 08 February 2018

When it comes to building a retirement nest egg for the future, property is still regarded as one of the safest long-term investments. While some... READ MORE

RBA keeps rates on hold again 06 February 2018

  The Reserve Bank of Australia (RBA) has left the official cash rate on hold at a record low 1.5 per cent at its first meeting... READ MORE

“We are so happy to have found a dynamic business partner in Paul Simpson. We are moving forward with clarity and a sense of control and direction that we did not have under our previous arrangement. We look forward to working with Paul as an ongoing part of our business strategy. ” more testimonials

Paul Welsby, Barclay Thomas Training Group Pty Ltd

Call  1300 55 22 30  now