Are YOU vulnerable to rising interest rates?


Are YOU vulnerable to Rising Interest Rates?

The idea of rising interest rates scares people. Let’s face it, nobody wants to be paying more per month to own their home, especially if they’ve bought a property recently because prices have been on the up. What’s been bothering me is the borderline hysteria that’s been in the headlines around what’s going to happen to property prices in Australia when interest rates rise. Let’s find out, are you vulnerable to rising interest rates?

How vulnerable is the Australian property market to interest rate rises?

It comes down to HOW many individuals are going to be vulnerable. As of April 2022, the total value of property in this country was $9.9 trillion dollars. The amount of debt on that? $2 TRILLION DOLLARS. That means 20% of the total value of Australian property is owed to the banks.

Around a third of residential property in Australia is held without any debt, around a third with a moderate amount of debt, and a third with A LOT of debt. So obviously, the latter third is more vulnerable than the other two-thirds. 

Let’s look historically

If you look at the history of price rises and falls and interest rate rises and falls over the past few decades, you’ll see that there’s not a direct correlation between rising interest rates AND falling prices. Here’s another fact. Bank forecasts, when it comes to the property market, are mostly WRONG. So who’s going to be more vulnerable to interest rate rises? The people that have bought property within the last two years. They’ve borrowed, to the extent of their capacity.

Crystal ball moment

So, are you vulnerable to rising interest rates? Well, not all of those people would have borrowed to the max, and not all of those people would not have fallback positions. So my assessment is a percentage of 12% of the total property market is VULNERABLE. 

The whole market won’t fall off a cliff, there won’t be a mass sale, and the only reason prices will fall is if consumers read too many of these headlines, BELIEVE them and ACT on them. 

This is a conversation I’d love to encourage you to join. We need to be talking more about truth, transparency, and trust in the property industry. Reach out to me on Facebook or Linked In and leave a comment.

Further Reading:

Is The Sydney Property Market Slowing?


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