Strategic financial decisions help Canberrans weather high interest rates as buyer confidence surges

The continued hold on interest rates has granted some relief for mortgage holders and strengthened buyer confidence in the Canberra property market.

In early May, the Reserve Bank of Australia decided to again hold the official cash rate at 4.35%, staving off another potential interest rate hike as cost of living pressures bite.

It comes as the unemployment rate in April rose to 4.1% from 3.9% in March, easing the risk of another interest rate increase.

ACT Finance Solutions Founder and Director Fiona Mckinnon said many mortgage holders were tightening their purse strings to manage increased mortgage repayments and cost of living pressures.

“Many people are feeling the pinch of higher interest costs after coming of some very low fixed rates, but appear to be managing this by being a bit more selective on their discretionary spending,” Ms Mckinnon said.

A considerable number of homeowners were also seeking refinancing options, she said.

“I am getting more enquiries in relation to refinances opposed to purchases but the majority of purchase enquires are currently coming from first homebuyers,” Ms Mckinnon said.

“Buyers appear to be getting more confident with the market, noting the expected interest rate reductions and also the tax relief for many buyers from the recent Federal Budget announcement.”

In announcing the latest monetary policy decision on May 7, Reserve Bank of Australia Governor Michele Bullock said while progress had been made to rein in inflation, it was wise to show continued vigilance about ongoing risks.

“The rise in interest rates that has been required to bring down inflation has been painful for many people,” Ms Bullock said.

“We also know that experiences of Australian households are extremely varied. On the one hand, there’s some people who are managing to save despite high inflation and interest rates.

“But on the other hand, we also know that there are households who are really struggling to make ends meet. These people don’t have a lot of extra savings, they might be working a second job, cutting back on discretionary items or making difficult decisions such as putting off medical appointments. These people are doing it very tough and the (RBA) Board and I are very conscious of this.

“Getting inflation back to target will take time…The path will likely continue to be bumpy and we should all be prepared for that.”

Ms Mckinnon said interest rates had been forecast to fall some time this year, and that was still possible although it was likely there would be only one reduction before the end of 2024, if at all.