The RBA kryptonite strategy | CRE Finance

In Australia right now the average working family has a borrowing power of around $800,000 or 5x Debt to household gross income.

As the RBA increases the cash rate to combat inflationary pressures this typical family borrowing power reduces by around 75,000 for every 1% increase.

For example, today this family could purchase a $1,000,000 with around $260,000 deposit, if rates were to move up from the current 1.35% to 2.35% this same home would require $335,000 deposit.

A similar theory holds for commercial finance.

In reality this is scenario is highly likely over coming months as NZ cash rate recently tightened to 2.5%.

Ultimately current conditions favour the buyer and quality property rarely reduces in value so its logical to speak to your bank or broker to understand current versus potential future borrowing capacity.

For those interested I’ve got a simple borrowing power calculator on my website that acts a general guide.

https://www.crefinance.com.au/borrowing-power

Tim Allen

Commercial Real Estate Finance Pty Ltd

tim@crefinance.com.au

0422043443