How Rising Interest Rates are Affecting First-Home Buyers

The property market has always been unpredictable and complicated, with numerous factors contributing to its ebb and flow. In June 2022, the Reserve Bank of Australia lifted its cash rate by 50 basis points to 1.35%, marking 125 basis points. And with the news comes great property investment opportunities for the first home buyers in Sydney.

While an increase in interest rate can cause a reduction in the borrowing capacity of prospective buyers, rising rates could also spark a decline in property prices, which may help first-home buyers enter the property market sooner. But property investment decisions are very crucial for homebuyers. Factors like property prices, mortgage rates, apartment location, etc., are taken into consideration before choosing the right property to buy. Thus, home buyers need to have full knowledge of the property market and the effect of rising interest rates on property prices. Getting first home buyer assistance from a real estate consulting firm helps home buyers to choose the best apartment for themselves and realize their dream of having their own home.

Changing home affordability of home buyers

The low-interest rates in the past contributed to a significant increase in property prices, which kept numerous first-home buyers in Sydney out of the property market. 

The rising interest rates lead to an increase in lenders’ assessment rates. It means that some prospective first-time buyers may see a reduction in their borrowing capacity, i.e., buyers can’t borrow as much for a given income. Thus, home buyers will have a small number of funds to spend while going to an auction or looking to buy a home. 

Savings are important for households for having adequate funds before buying a property home may reduce the amount to be borrowed. It also increases the chances of getting loans on good terms. For buyers with a fixed budget looking for a property, a reduction in their borrowing capacity could mean they may have to save a larger deposit or concession on the type of property, size, or position to buy within their budget. 

First home buyers are joining the Sydney property market

Sydney property markets are providing great deals for home buyers as the dwelling prices are falling. As a result, buying a home for the first time in popular suburbs like Merrylands, Homebush and Liverpool has become more affordable than before.

The first home buyers need to consider their borrowing power and repayments when entering the property market. While borrowing power means the ability to borrow based on a buyer’s financial situation, repayments refer to the ability to pay interest on a home loan along with the loan amount.

Yet, rising interest rates greatly impact a household’s borrowing and repaying abilities. With the first home buyer assistance from professionals from real estate consulting firms, one can manage their financial budget. Having a good financial portfolio is important for home buyers as it highlights an individual’s finances and helps to increase the credit score and borrowing capability. 

Home buying assistance for first home buyers 

While property and rent affordability continue to challenge prospective buyers, first-home buyers can still gain in the facade of rising interest rates and falling property prices. In addition, the Australian government provides several financial aids to home buyers to encourage people to have their own homes.

One such scheme is the First Home Owner Grant (FHOG). The grant is given to individuals for buying their first house or building their own home. Besides this, first home buyers can take advantage of other schemes like First Home Super Saver Scheme, which allows individuals to save for their first home and provide concessions in tax payments. In addition, the First Home Loan Deposit Scheme enables buyers to pay as low as 5% as a deposit and offers first home buyer assistance to help buyers enter the property market sooner.

Conclusion 

The recent trend of falling property prices amidst rising interest rates is a blessing for home buyers. The continuous cooling period in the real estate market, i.e., the slowing growth in the property market and lower prices, are bringing opportunities for first-home buyers in Sydney to buy an apartment.

However, finding the right property under your budget is crucial for maintaining an individual balance sheet. With the assistance of real estate market professionals at Quarter Acre, you can choose the best property for yourself.