All Topics / General Property / Is this the catalyst that will cause a property crash?

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  • Profile photo of BennyBenny
    Moderator
    @benny
    Join Date: 2002
    Post Count: 1,416

    I would love to hear your thoughts on a topic I’ve been pondering – “How much would interest rates have to rise before we begin to see massive defaulting?”

    Today, with bank interest rates around 3.5%pa, and with loan amounts being borrowed having screamed upward as prices have increased (and are currently still increasing), what kind of rate increase today would have the property train go off the rails?

    The RBA is talking of keeping things low for years, but is that really going to happen? And if Bank rates went up just 1% (i.e. from 3.5% to 4.5%), that is actually not a 1% gain at all – it’s a 28% gain !! Would it take much more than that to bring about a collapse?

    Over to you though… would a 1% rise be a big deal, or nothing to worry about?

    Benny

    Profile photo of Colin RiceColin Rice
    Participant
    @fms
    Join Date: 2011
    Post Count: 338

    Went to a seminar last night and Perth people pay 24% of nett wages to rent/mortgage repayments, Sydney is closer to 44% so it will be relative to the geographic location of the impact that is felt.

    I would say we will get into stress, without anything else changing such as unemployment or hyperinflation, around the 6% mark which historically is a comparatively low-interest-rate historically speaking as banks asses still at around 7% rates, factoring increases based on the medium historical average interest rate.

    There are many other variables to consider than just interest rate.

    • This reply was modified 3 weeks, 3 days ago by Profile photo of Colin Rice Colin Rice.

    Colin Rice | CDR Finance
    http://cdrfinance.com.au/
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

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