Mortgage rates have been on the rise in recent weeks causing some concern that they may start to put pressure on housing affordability. However it’s important to remember that mortgage rates are still relatively low by historical standards and there are a number of factors that suggest they are unlikely to rise too much further in the near future.
That said there are a number of factors that could cause mortgage rates to rise in the coming months and years. Here are some of the things that could put upward pressure on rates:
1. Increasing inflation: One of the key things that determines mortgage rates is inflation. As inflation increases so do rates. While inflation has been relatively low in recent years it is starting to pick up. The Consumer Price Index rose 2.3% in the 12 months to March which is the fastest pace of growth since February 2012. If inflation continues to rise it is likely that mortgage rates will too.
2. Higher interest rates: Another important factor that determines mortgage rates is the interest rate set by the central bank. The Reserve Bank of Australia has kept rates at a record low of 1.50% since August 2016 but there are signs that they could start to rise soon. If the RBA starts to increase rates it is likely that mortgage rates will follow suit.
3. Rising house prices: Another factor that could cause mortgage rates to rise is if house prices start to increase at a faster pace. This is because lenders will be less likely to offer low rates if they think the value of the property is likely to increase. House prices have started to pick up in recent months with the median house price rising 3.1% in the 12 months to March. If this trend continues it could put upward pressure on mortgage rates.
4. Economic growth: Another factor that could cause mortgage rates to rise is if the economy continues to grow strongly. This is because strong economic growth can lead to inflationary pressures which as we mentioned before can cause mortgage rates to increase. The Australian economy grew by 0.9% in the March quarter which was the strongest growth in four years. If this trend continues it could put upward pressure on mortgage rates.
5. Higher taxes: Another factor that could cause mortgage rates to rise is if the government introduces higher taxes on investment properties. This is because investors are more likely to pass on the higher costs to borrowers in the form of higher rates. The government has already introduced a number of measures to cool the housing market such as the introduction of a capital gains tax and changes to negative gearing. If the government introduces further measures to discourage investment in housing it could cause mortgage rates to rise.
While there are a number of factors that could cause mortgage rates to rise it’s important to remember that they are still relatively low by historical standards. The average standard variable rate is currently around 4.85% which is well below the long-term average of around 7%. This means that even if rates do rise in the coming months and years they are unlikely to return to the high levels seen in the past.
What is the highest mortgage rate you can get?
The highest mortgage rate you can get is 20%.
How much can mortgage rates increase in a year?
Mortgage rates can increase by 2% in a year.
How often do mortgage rates change?
Mortgage rates can change daily.
What impacts mortgage rates?
Mortgage rates can be impacted by the stock market inflation and the Federal Reserve.
Will mortgage rates continue to rise?
Mortgage rates will likely continue to rise as the economy strengthens.
How long do rising mortgage rates impact home affordability?
Rising mortgage rates will impact home affordability for as long as they continue to rise.
At what point do rising mortgage rates make it difficult for buyers to purchase a home?
Rising mortgage rates make it difficult for buyers to purchase a home when they reach 10%.
How much can mortgage rates increase before they become unaffordable?
Mortgage rates can increase by 5% before they become unaffordable.
How long will it take for mortgage rates to become unaffordable?
Mortgage rates will become unaffordable within a few years if they continue to rise.
What can buyers do to combat rising mortgage rates?
Buyers can combat rising mortgage rates by becoming more financially secure and saving for a larger down payment.
What is the highest mortgage rate in Canada?
The highest mortgage rate in Canada is 30%.
What is the highest mortgage rate in the United States?
The highest mortgage rate in the United States is 10%.
What is the highest mortgage rate in the United Kingdom?
The highest mortgage rate in the United Kingdom is 5%.
What is the highest mortgage rate in Europe?
The highest mortgage rate in Europe is 7%.
What is the highest mortgage rate in Australia?
The highest mortgage rate in Australia is 8%.
