As the market-shock sets in after a higher than expected 50 basis-point rate hike, the steepest hike in 22-years, borrower’s anxiety are now in full motion as expensive mortgages and loans come into fruition. How much more pain do the borrowers have to endure until reprieve?
The RBA has made a strong commitment to target and achieve inflation between the 2-3% bracket, and it is aggressively pursuing this target with steeper-than-usual rate hikes. Due to the rapid rise in the cash rate, with another 50 basis-points expected by many economists in the 3rd quarter of 2022, we are likely to see normalising inflation rates between the targeted bracket as soon as 2023. The real-estate market will consequently be projected to fall as lending and liquidity will become increasingly scarce. The central bank will however need to juggle delicately as over-aggression of tightening and rate hikes could potentially trigger a recession.
What does this all mean for real-estate investors and home-owners? Be patient and stay put. Markets can be hard with this amount of macro-economic uncertainty. A long-term outlook on the market will likely reap bigger rewards. Planning is key to being primed and ready when certainty and positive sentiment returns to the market. Use the uncertain times wisely to prepare so that when the tide turns, the effort put in bears fruit.
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