Brighter Buying

Rate rises irrelevant… really?

by Karleen Jentz, Copywriter 4 November 2015

Who’s afraid of big, bad interest rate rises? Not guru Terry Ryder it would appear.

Throughout October, the big four banks, and a number of smaller lenders raised interest rates independently of the Reserve Bank of Australia decision to keep rates on hold.

The banks say the increases are a result of changed requirements for how much capital they must hold.

Not surprisingly, the rate hikes have been reported extensively in Australia’s media (see Your Investment Property magazine news archives for rolling commentary on the bank announcements).

But, never one to mince his words, Ryder is keen to hose down fears that these rises will wash out property markets.

“Many articles, inspired by economists suffering from limelight deficit syndrome, have portrayed this as a death knell for property markets,” Ryder told Property Observer.

But it takes more economic factors than an incremental rate rise to fizzle the property party. Competent government, infrastructure spending, business spending and consumer confidence all need to be considered.

Ryder told Property Observer the Sydney boom would have happened “whether the official interest rate was 2%, 4% or 6%”.

So if your bank has upped rates, don’t despair. It may dent your cash flow but – in isolation – it’s unlikely to influence your property value.