Cash rate climbs in February, but there is good news for buyers
In its first meeting of 2023, the Reserve Bank of Australia (RBA) today raised the cash rate for the ninth consecutive time. It increased from 3.1% to 3.35% as the bank continues to attempt to ease rising inflation.
While this can impact borrowing power of prospective home buyers, the positive news for anyone looking to purchase is that home prices have continued to decline throughout the country. CoreLogic’s national Home Value Index fell 1% in January, following a 1.1% drop in December.
A decline was seen in all capital cities:
- Hobart -1.7%
- Brisbane -1.4%
- Sydney -1.2%
- Melbourne -1.1%
- Canberra -1%
- Adelaide -0.8%
- Perth -0.3%
- Darwin -0.1%
For the first time since March 2021 Sydney’s median dwelling value is beneath $1 million.
Demand has also dropped. Sales in the capital cities are estimated to be 29.4% lower than the same period in 2022 and 11.5% below the five-year average. This means less competition and the potential to negotiate on price.
The good news for investors
With house prices coming down throughout the country, it could be a good time to purchase. On top of this, rents have jumped by 17.6% for units and 14.6% for houses over the last year, according to Domain. At the same time, the number of rental properties that are vacant is at an all-time low. This presents an opportunity for investors who may be able to find more positive yields.
What does it mean for refinancing?
If the value of your home has decreased, it will impact your equity. However, if you have continued to pay down your principal, this impact will be mitigated. On top of that, while housing values have declined over the last year, they have not yet surpassed the boom in values during the pandemic, which peaked in March last year. According to Proptrack data, prices nationally are still 28.5% above their pre-pandemic levels. This means the amount your equity will have been impacted will depend on when you purchased the property. If it was pre-pandemic, your home is likely to still be worth more today than when you bought it.
Regardless, if your interest rate has increased and you haven’t refinanced in the last year, reach out. We will evaluate your situation and let you know if you could be on a more competitive or more suitable loan.