RBA considered 40-bp cash rate raise
The Reserve Bank has revealed that it weighed up three different options for the size of the first cash rate rise in alm...
“There’s more to calculating how much you can afford than just looking at current interest rates,” director Claire Noone said.
The warning coincides with a report by the Reserve Bank of Australia which said the low interest rate environment was prompting people to take more risks with their investment strategies.
“While increased financial risk-taking is an expected outcome of lower interest rates, it is important that households understand, and appropriately account for, the financial risks they take,” the Reserve Bank’s Financial Stability Review 2013 said.
Dr Noone urged property buyers to consider what they could afford in the long-term.
“Carefully assess your financial situation and desired standard of living, including any likely future changes, such as starting a family and interest rate rises,” she said.
Buyers should also factor in costs such as conveyancing fees, loan establishment fees, stamp duty, GST and building inspection fees, she said.
“Using online tools such as loan simulators and getting independent financial advice could help avoid any nasty surprises,” she said.