Why has the Reserve Bank increased interest rates at such challenging times?

It has been a long time coming, with interest rates continually decreasing with minor fluctuations or on hold since 1990. Many homeowners reading this article may not be aware of or remember the late 1980s when home loan interest rates peaked at over 18%. This is more than 30 years since we had such high-interest rates. *

The Reserve Bank, in essence, is the government body that oversees and regulates the economy and inflation to ensure a balanced society.

To keep it simple- if there is a lot of money and spending in circulation or greater demand for products and services that cannot be fulfilled, this will impact the nation. Resulting in a shift or change to bring the economy back into balance.

Like it or not! Richer or poorer, the Reserve Bank needs to create an economy to balance the overspending and inability to supply goods and services and reduce the increased debt that cannot be sustained.

Due to many economic circumstances and the impact of Covid (such as the current difficulties in sourcing employees and the challenges of buying products and obtaining services), governing bodies are regulating the economic balance by curbing spending to keep up with demand by increasing costs and interest rates.

If interest rates and living expenses rise without wage increases, then spending must come down, reducing the need for services and products. It may not seem fair or right, but it is how our economy is controlled and managed.

How does this affect your property market? It doesn’t!

If you do your research, know the why, what, and when and are educated to understand the property cycle. It also helps to have an experienced team help guide you through the current selling and buying process. If you have any questions about the current market or would like further information, please contact our team on 131 MAX (131 629).

* Source: Reserve Bank of Australia  https://www.rba.gov.au/statistics/cash-rate/