Read the latest comments from Angus Raine CEO of Raine & Horne about the hike in interest rates…

The decision by the Reserve Bank of Australia (RBA) to increase the official cash rate by 25 basis points proved the major talking point for the property market in October.

The increase pushes the central bank’s cash rate to 3.25 per cent and the RBA governor Glenn Stevens said the increase was as a result of Australia’s continuing growth.

Raine & Horne CEO Angus Raine says the increase was the market’s worst kept secret, given the regular snippets of more favourable economic news coupled with the fact interest rates remain at historic low levels.

Nevertheless with the financial markets pricing in more rate rises by Christmas, the Raine & Horne chief is not convinced home owners can stomach more increases, especially as the Federal Government is also phasing out the First Home Owners Grant Boost (FHOB).

To this end, the Real Estate Institute of Australia says when a similar stimulus package was phased out in July 2002, the presence of first home buyers in the market fell by around 38% from 13,000 to 8,000 per month.

See what John Symonds of Aussie Homes has to say…

However Mr Angus Raine remains cautiously optimistic for the property market despite the challenges. “After an interest rate hike, people usually go back to the drawing board and work out what they can afford. There’s usually a time lag of a few weeks and then they’ll go out hunting again.”

REIA President David Airey is squarely in Mr Raine’s camp, and says caution is required regarding further decisions on rates.

“While the economic indicators suggest that Australia is on the way to recovering from the impact of the global financial crisis, these are early and tentative signs and we should be wary not to slow economic growth by increasing interest rates prematurely,” said Mr Airey.

PriceFinder Chief Operating Officer Kent Lardner, says, most home buyers need to be aware of inter­est rate movements, and urges them to allow for a servicing buffer for loan repayments of up to 3%.

 “The rise in interest rates is a positive sign of a strengthening economy. From PriceFinder’s perspective, our biggest concern over the last 12 months has been jobs losses and the effect that could have on property markets.”

 “The good news on the job front to-date will continue to help buyer confidence and even with the expected interest rate rises in the coming 12 months, our rates will still be relatively low,” adds Mr Lardner.

This article was republished from Raine & Horne Terraine October 2009.

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Monika Bonet is the Principal of Raine & Horne Glenelg, your Glenelg Real Estate Agent and Property Management expert.

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