Rates increase sees market return to pre-COVID conditions

The Reserve Bank of Australia’s (RBA) decision to raise the interest rate by another 25 basis points represents a nine-year high of 2.60% and shows the return of the market to pre-COVID conditions.

This comes from the Real Estate Institute of Queensland (REIQ), with the latest Australian Bureau of Statistic (ABS) lending figures indicating that in Queensland, even with the rate increases, the number of loans commitments, average loan size and the number of first home buyers remained relatively stable in August 2022.

“Following APRA’s lending buffer increase, there’s been a downward trend in the number of loans for both owner occupiers and investors of around 20%,” REIQ CEO Antonia Mercorella said. “First home buyer activity and overall owner occupier levels have returned to pre-COVID levels and we’re seeing these stabilise. This indicates that the APRA’s increased lending buffer has done its job and is potentially now acting as more of a hindrance, especially given the current rental crisis where we need more investors to put rentals on the market.”

With yet another rate increase, Ms Mercorella encouraged loan holders to look for the best rate and choose the right bank to suit their needs.

“With the volume of loans falling, banks are increasingly motivated to attract and recruit new customers, so we’d encourage people to speak to their bank about what rate they can offer and shop around for the best rate.”

With six consecutive rises now, mortgage holders who borrowed up to their maximum capacity are likely to be hurting.

“We are seeing the RBA acting in quite an aggressive fashion with one rise after another in quick succession and that’s taken many mortgage holders by surprise, given we’ve been become accustomed to historically low interest rates,” Ms Mercorella. “While many of those mortgage holders would have been assessed with the buffer test required by APRA, it will certainly start to bite those who have borrowed to their maximum.”