Interest rates are back in the headlines, and for good reason. A combination of stubborn inflation, near three-year-high oil prices and ongoing instability in the Middle East is pushing financial markets to price in further tightening from the RBA.
We wanted to give you a clear picture of where things stand and what it might mean for your lending.
Where rates stand today
The RBA has led the developed world on rate hikes this year, lifting the cash rate three times to reach 4.35%.
Despite this inflation remains well above the RBA’s 2–3% target band with its preferred measure stuck at around 3.6%.
Financial markets are now forecasting the cash rate to reach 5.02% by the middle of next year, equivalent to roughly two to three further quarter-point increases from current levels.
A delicate balancing act
This isn’t a straightforward story of “rates go up, full stop.” The RBA is walking a fine line:
- The three rate rises already delivered this year, combined with changes to tax concessions for property investors, have created real uncertainty in the property market. Buyers have retreated and home prices have slid over the past year.
- Consumer confidence sits well below the three-decade average, and the “wealth effect” from falling property values means many households are spending less.
- If the RBA tightens too aggressively, it risks tipping the economy into a sharper contraction with job losses a real possibility.
In short, the central bank has to weigh the cost of persistent inflation against the risk of over-tightening into a weakening economy.
What this could mean for the property market
We’re already seeing the effects flow through. Property transactions are down an estimated 20–30% over the past few months across many parts of Melbourne and Sydney.
In response, we’ve noticed a number of lenders sharpening their pricing to keep lending volumes up.
In some cases we have already managed to save clients over $10k per year in reduced interest.
Is it time to consider fixing?
With the possibility of further rate rises on the horizon, this is a sensible moment to review your lending strategy.
Some questions worth asking:
- When did you last check your interest rate and discount? With lenders competing harder for business, there may be a better deal available than the one you’re currently on.
- Should you fix a portion of your loan? Locking in part of your lending now could provide certainty against further increases — though it comes with trade-offs if rates move differently than expected.
- What does your lending look like over the next 12–24 months? If you have upcoming plans — a purchase, a refinance, a renovation — now is a good time to map out how a higher-rate environment might affect them.
Every client’s situation is different, and the right approach depends on your goals, your risk appetite and your existing loan structure.
If you haven’t reviewed your rate or your broader lending plan recently, we’d encourage you to get in touch so we can talk through your options together.
Thanks as always for reading.
—
This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. Nothing on the Long Property website constitutes legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
Australian Credit Licence 53038
