Interest rates have a profound impact on how much you can borrow and, consequently, what you can afford to buy. Understanding this relationship is crucial for timing your purchase and structuring your finances.
A 1% increase in interest rates can reduce your borrowing capacity by roughly 10%. For a buyer who could borrow $800,000 at 5%, a rise to 6% might reduce that to around $720,000. This directly affects which properties and suburbs are within reach.
Smart buyers plan for rate movements. We always advise clients to stress-test their budget at 2-3% above the current rate. This ensures you can comfortably service your mortgage even if rates rise. It also means you're not stretching to your absolute maximum, leaving room for life's unexpected expenses.