The relentless speculation in media about interest rates is causing unnecessary uncertainty for consumers.
Reserve Bank governor Philip Lowe has declared publicly, repeatedly, that the RBA has no intention of lifting the official interest rate any time soon. He has stated many times that he expects the next rate rise to be in 2024.
But media keeps telling us interest rates will rise in 2022 – and that a rate rise will cause widespread mortgage stress and crash the property market.
Hotspotting founder Terry Ryder says: “History shows that an interest rate rise does not halt a boom. In the past, it has taken 5 or 6 interest rate rises to bring a raging market under control.”
Previous nationwide booms, in the late 1980s and in the early years of this century, occurred during times of very high and rising interest rates.
The notion that a rate rise would collapse the property market is based on the false premise that the current boom has been caused by low interest rates.
“My list of reasons for the boom has 16 dot points, with the level of interest rates just one of them,” he says. “Low rates didn’t cause the boom – and rising interest rates wouldn’t stop it.”
Media speculation about mortgage stress caused by a rate rise overlooks the buffers in the system. Most households are well ahead on their mortgage payments – and borrowers are not assessed on current interest rates, they’re assessed on current rates plus 3%.
