How to manage rising interest rates: a perspective from a financial services expert

A topic that is on many homeowners' minds, is interest rates. In Australia, we had interest rates at record lows during the Coronavirus pandemic for 18 months, remaining unchanged between November 2020 and May 2022.

Since, we’ve had a number of rate rises. But what does this mean for homeowners, buyers, and landlords? We spoke with a financial services expert and CEO of Lydian Financial Services, Chris Booth, for more information.

Ayre Real Estate: In your view should buyers and owners of property in Sydney be concerned about rising interest rates right now?

Chris Booth: Rising interest rates are a concern for all borrowers. Interest rates rise, and repayments of your loans increase, this has an impact on personal budgets.

I think this is a great time to review interest rates, dust off budgets, and replan cash flow and property plans. For landlords, it’s a great time for a rent review of your properties.

For buyers, it’s never a bad time to look at buying a property. Have a ‘financial plan’ in place - buying good properties over the long-term builds’ wealth!

Ayre Real Estate: What are the key drivers influencing interest rates? What’s causing rate rises and what factors would cause them to continue to rise over the remainder of the year?

Chris Booth: The key focus of the Reserve Bank of Australia (RBA) and all Western Central Banks is inflation. Domestically we are at 7+% with overseas at 9 to 10% (2 to 3% is the RBA comfort level).

Increases in fuel prices, and shortages of all things post-COVID-19 are causing issues with high demand and low supply. Raw materials and food production have also been impacted by supply issues compounded by the Russian and Ukraine war.

The only leverage the RBA can use to slow inflation is interest rates. Remember, we have had stimulus/ultra-low rates in place through the last 2 years to support coronavirus pandemic conditions. I think we are just working this unwinding of stimulus out and getting into a new ‘norm’.

Unfortunately for borrowers, interest rates will continue to rise for the remaining few months of this year. Interestingly, the 2024 forecast is interest rates will have to reduce to support growth – it’s a delicate balance.

Ayre Real Estate: What advice would you give to landlords concerned about rising interest rates now?

Chris Booth: Landlords should catch up with their professional team. A mortgage broker can do a rate review, a Property Manager can review rent, do a budget, and re-establish your property cashflows. Non-deductible debts should be ‘interest only’ if you have personal debt.

Ayre Real Estate: What advice would you give to current homeowners?

Chris Booth: Bunker down, revise budgets, stick to the long-term plan, and review your interest rates.

Ayre Real Estate: What about buyers looking to secure finance or purchase in the short term?

Chris Booth: I think buyers have a great opportunity right now with lower prices, low vacancy rates, increase of rent yield, property supply shortages. As migration opens, so will further demand. If affordability is there, then it is a good time to start looking at the spring auctions.

Ayre Real Estate: Is there anything else people should be mindful of regarding rate rises this year?

Chris Booth: Have a strong professional network in place, a good mortgage broker, real estate agent, financial planner, accountant, and lawyer. To make informed decisions on long-term finances, get advice. These relationships will serve you well for many years to come.

Ayre Real Estate: Any final comments or advice?

Chris Booth: Bunker down, there is an adjustment going on right now on living costs. It will take the next 6 to 12 months to work out.

About Chris Booth:

Chris has over 30 years of Banking experience. Starting his career in the Isle of Man working in Treasury and Financial Market Services for Royal Bank Of Scotland, Chris left the island when he married Kellie and moved to Sydney, Australia.

He has worked for Bank Of China in Treasury, Commonwealth Bank in Premium Banking and Corporate Banking, St George Bank Corporate specialising in finance for Financial Services Business. Specialising in Mortgage Broking when he joined The Announcer Group in 2010, Chris built a successful Mortgage Broking Business and Team within an integrated Wealth Management Business.

More recently, he was the Manager of Lending at Infocus Advisory where he managed a team of Mortgage Brokers who worked in Partnership Referrals with the Groups 200+ Adviser network.

Chris is a seasoned lender with experience in residential and commercial complex transactions. He has mentored and managed many Mortgage Brokers into the industry. He has a passion for team building and has professionally managed both operations and sales team within scale business’. He brings these years of experience and knowledge to the Lydian Team.

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