Eight interest rate rises this year have created some big winners and losers.
So let's look at the different effects these rate hikes have on investors, homeowners and renters.
This year, the Reserve Bank has made home loan repayments far more costly for households with mortgages than expected.
That’s around 3.3 million households impacted, but the Reserve Bank can act with impunity because most homeowners will cope with higher repayments by cutting back their other spending, which is what the bank wants.
The 2.5 million private renting households are the biggest losers, whose numbers are swelling.
Not only do most of the increasing numbers of overseas arrivals have to rent but they are being joined by frustrated aspiring first-home buyers who must keep renting because they can’t obtain housing finance.
As the rental shortage becomes critical and vacancy rates drop to record lows, rents are set to soar.
Higher housing loan repayments flow directly into the big banks’ vaults, which then distribute this extra largesse as dividends to shareholders.
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Investors who own bank shares will benefit at the expense of those who have borrowed to buy property.
In the same way, as rents rise, property investors will reap the benefits by securing higher yields.
While landlords can’t increase asking rents whenever they want to, rents are bound to rise whenever leases expire, despite government attempts to limit rent increases and ban rental auctions.
Those paying off or renting a home pay the price for controlling inflation, while investors with assets such as shares or investment properties will reap the rewards with higher dividends and rents.
This movement of money from renters and home buyers to investors is not fair but is how the system works.
There is only one solution to this inequitable situation...If you can’t beat them, join them.