Rising Interest Rates and How They Will Affect the Price of Housing in Perth
Over the past year, interest rates on home loans have risen from 0.1% in April 2022 to 3.35% in February 2023, with many lenders increasing their rates in response to market conditions. The question on many Perth residents’ minds is: how will this affect the housing prices in Perth?
Impact on Housing Prices
Factoring in the increase in interest rates since April, a $500,000 loan would have its monthly repayment increased close to $794 a month. This has made the barrier of entry for new home buyers to enter the market even more challenging and assessment rates for new purchases higher. This means that demand for housing may decrease, leading to a slowdown in price growth or even a decrease in prices in some areas. It is worth noting that cities in the east of Australia have recorded a 10% from their peak. Meanwhile, Perth has been the most resilient at only a 1% drop from its peak.
Perth’s stable housing market
Perth’s housing market has been relatively stable despite rising interest rates, as there are severe shortages of houses, driving up the prices of homes and putting pressure on rentals.
With over 5,000 international students planning to enter Perth this February, rents will remain steady due to student accommodation shortages.
There are also almost 19,000 families on WA’s social housing waitlist, making the demand for Perth properties on the rise.
Managing Your Home Loan Amidst High-Interest Rates
Rising interest rates could make your monthly repayments more expensive if you already have a home loan. However, there are steps you can take to manage your home loan amidst high-interest rates:
- Review your loan and see if you can refinance to a lower interest rate. This could help you save money on interest over the life of your loan.
- Consider making extra repayments if you can afford it. This will help you pay off your loan faster and reduce the overall amount of interest you pay.
- Check if you are eligible for a loan modification or repayment assistance. Your lender may have programs in place to help you manage your loan during times of financial hardship.
Considerations for New Home Buyers
If you’re considering buying a home in the current market, it’s important to factor in the rising interest rates. Here are some things to consider:
- Calculate the maximum amount you can afford to borrow based on higher interest rates. This will help you avoid overextending yourself financially.
- Shop around for the best interest rates and loan terms. Don’t just go with the first lender you come across – do your research and compare your options.
- Consider getting a fixed-rate home loan. This will provide certainty around your repayments and protect you from future rate hikes.
Conclusion
While rising interest rates may have an impact on the price of housing in Australia, it’s important to remember that the housing market is influenced by many factors. By taking steps to manage your home loan and making informed decisions as a new home buyer, you can navigate the current market and achieve your housing goals.
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