Investors have not seen interest rate rises for more than a decade and will need to adjust their playbook.
Though it is easy to get caught up in the headlines of large interest rate rises, investors should be focused on the domino effects of rising rates and their destination.
Hugh Dive, chief investment officer at Atlas Funds Management, believes the Reserve Bank of Australia will be wary of raising rates too quickly as Australian households have higher debt levels than in previous rate rise cycles. The average loan size for owner-occupiers in Australia as of April 2022 was $611,000, almost double the size when rates last rose in November 2010.
Moore says that rising interest rates haven’t always led to falling property prices as it depends on where you are in the interest rate cycle. Typically, in the earlier stages of the rate cycle, both rates and property prices can rise as they did in 2004–7. But towards the later stage of the cycle, higher rates start to bite, affecting consumers’ ability to fund their borrowings.
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