Record low interest rates are being treated with a degree of caution by one of the city’s financial counsellors who deals with the aftermath debt stress, bankruptcy and foreclosure.
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In a surprise move, the Reserve Bank of Australia (RBA) left the official cash rate unchanged at 2.25 per cent at its monthly meeting on Tuesday.
Economists had widely predicted the official interest rate would again be dropped by 25 basis points, putting pressure on already inflated house prices in Sydney and Melbourne.
Shannon Post, a senior financial counsellor at Wagga Family Support, said she was “flat out” meeting with clients who have been burdened with debt.
Ms Post warned against living outside financial means.
“People can be lured by a false sense of security,” she said.
“If you have a variable loan, beware the interest rate will change.”
Ms Post’s warning comes as the Advertiser reported Wagga mortgage brokers had witnessed a “small spike” in lending inquiries.
Lenders and real estate agents have consistently promoted low interest rates as good news for the city's first-home buyers.
“You need to prepare for the future possibility that it could go up,” Ms Post warned.
“You should already be paying more than the minimum amount.”
Ms Post advised households to keep an emergency fund as well as increasing repayments to stay ahead.
“I don’t think people prepare enough for loss of employment or changing circumstances,” she said.
Fitzpatricks Real Estate, one of the city’s biggest real estates, reported the sale of an extra 18 homes in January and February than the same time last year.
Director Richard Fitzpatrick said houses remained “very affordable” in Wagga after Tuesday’s hold on interest rates.
"This allows affordability to first-home buyers and investors,” he said.
“We are certainly on an upper trend.”
Mr Fitzpatrick said he was not seeing the “dramatic increase” in house prices that have plagued the market in Sydney, Wollongong and Melbourne, prompting fears of a housing bubble.
“The percentage has gone up but we are not having the dramatic increase,” he said.
Mr Fitzpatrick said investors were not taking advantage of low lending rates to snap-up property and “squeeze out” prospective Wagga buyers.
“We’ve got 100 per cent of the market,” he said.
“They are a relatively big part of the market in Sydney and Melbourne but we don’t have foreign investors buying here.”
Interest rate decline
January 2012: 3 per cent
January 2013: 2.5 per cent
January 2014: 2.5 per cent
January 2015: 2.5 per cent
February 2015: 2.25 per cent
March 2015: 2.25 per cent
