The Relationship Between Inflation and Housing Prices
Inflation is defined as an increase in the prices of goods and services as a result of a decrease in the purchasing power of money. A high inflation rate means more money moving around more quickly, instantly increasing housing prices. So, if you are looking to buy a house in Melbourne and are worried about the rise in interest rates, it may be the right time to seek the services of mortgage brokers in Melbourne.
The Australian Bureau of Statistics uses the Consumer Price Index to analyze the changes in prices of items in various categories and calculate the current inflation rate. Although the average target inflation rate of the country is 2-3%, it reached 3.8% in Q2 2021, demonstrating a 12.5 year high. However, the inflation rate fell to 3% in Q3 2021.
How Does Inflation Impact Housing Prices?
Housing prices usually rise with inflation because of the increase in interest rates. Thus, housing is considered a good asset during periods of high inflation, as its value continues to soar in the market.
It is also important to understand that the inflation rate highly influences the decision of the RBA to adjust the cash rate. The authority may decide to increase or decrease the cash rate to meet the inflation target, which plays a crucial role in determining the interest rates for home loans in Australia.
If you are a prospective homebuyer, the increase in inflation rates may make it difficult for you to save up for the 20% down payment on the property. However, you have nothing to worry about if you have already paid the deposit and taken out a fixed-rate mortgage, as most mortgage brokers in Melbourne recommended.
Since inflation only impacts the cost of the house, the amount you pay for your home will remain the same, but its value will increase.
Speak With Mortgage Brokers Melbourne Today!
Whether you are planning to buy your first home or an investment property, mortgage brokers Melbourne can help you understand more about inflation and its effect on housing prices.
To learn more about the fixed-rate mortgage and if it is the right choice for you, please get in touch with Opulent Finance today. Our experienced mortgage brokers will do all the legwork and provide you with expert financial guidance on the current inflation and interest rates.