Latest / The Follio Property Podcast / Will Interest Rates Rise Again in 2026? What Property Investors Should Know Right Now

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Will Interest Rates Rise Again in 2026? What Property Investors Should Know Right Now · The Follio Property Podcast

• 0:00
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• 0:56
  The big four banks are predicting interest rate hikes, and for savers, that means locking in term deposits could carry risks. Markets now expect interest rate hikes to replace cuts in 2026.
• 1:08
  The sentiment has definitely changed in the market. The baking in another two potential interest rates. Do you think the two-speed economy will take a bigger hit on this? That's what scares me. A lot of the sentiment around interest rates is already taking place in the markets. It's becoming the perfect storm. Interest rates all of a sudden surprise everyone and get to 7%. I've got a cash burn. I've got a cash flow problem.
• 1:29
  That's getting out of control in this country. It's going to get harder to get debt from the majors. So that stat is on a 25% uplift in second tier and private debt. You're going to see that stat probably increase even more. We've seen a push to unique circumstances increasing by the day. There was an article released recently that they're estimating $3 billion worth of mortgage fraud across the majors.
• 1:55
  You're listening to the Folio Property Podcast. I'm Rhys Bettle and I'm here each week with my co-host Lachlan Delahunty. Particularly in the finance space, I thought, look, we were keen to do a quick one today just because there's a lot going on just to address. Hey guys, quick thing to share. If you're serious about investing in Australian property right now, you need to see what we put together.
• 2:14
  It's called the National Investment Report, and it's our brand new monthly deep dive into exactly where the market is moving, what the data is saying, and what the smart investors are looking at right now. You can get the first access completely free. Just scan the QR code on the screen right now or click in the link below to fill out the form. Let's kick started with interest rates. Now, we've spoken about on the podcast over the last few weeks, even months to a certain extent, that the sentiment has definitely changed in the market.
• 2:44
  Do you think the two-speed economy will take a bigger hit on this? Definitely. I think the divide between the markets that are cooling and those that are continuing to rise, that gap's only going to get more exaggerated as these rate rises start to come in.
• 3:01
  And from a property investment perspective, you're hearing a lot of people ourselves included out there saying this is some of the best buying conditions in certain areas. Do you think that's still being the case if we do see another two rate rises or is that going to really impact the property market?
• 3:16
  The sentiment's already factored in those rate rises. So while we're seeing now arguably some of the best buying conditions we've seen since COVID, the market is completely uncertain at the moment. So what does that mean? Historically, you'll see going into a federal election or the May budget, there's little activity and that's what we're seeing at the moment. But overlay that with uncertain macroeconomic matters, be the war in Iran taking place. That's another element of uncertainty.
• 3:42
  and on the back of that, likely rising inflation and therefore rising interest rates. So those three things essentially just equals complete uncertainty in the market. Sentiment, as we know, drives market, be that with speculation and or doom and gloom as we're seeing it take place at the moment. So I think a lot of the sentiment around interest rates is already taking place in the markets.
• 4:06
  I don't foresee the actual, the events, be that the rate rises, being any more catastrophic than what the sentiment's already doing. Does that make sense? Yeah. Do experienced investors care about interest rates or are they purely focused on market conditions? Definitely, especially if you've got...
• 4:22
  a lot of debt rates or a larger portfolio, if you see 50 bps in the next three months, that has a tangible impact on your cash flow. So I think playing the long term in terms of capital growth and where markets sit, a sophisticated investor will look past that and will only see this moment in time as an opportunity. While everyone else is fearful, I'm going to capitalise. But what you will keep an eye on, what I'm personally keeping an eye on is how can I get this asset to watch its face?
• 4:49
  Previously, I was doing my numbers on a 6% interest rate. I might conservatively now do that on a 7% interest rate, which sounds extreme, but when I'm looking at yields and how I can manufacture increased cash flow, I want to keep one eye on that because if I go out there and buy all these assets on 2.5%, 3% yields and then interest rates all of a sudden surprise everyone and get to 7%, I've got a cash flow problem. So absolutely, as a sophisticated investor...
• 5:16
  I've got to be doing my numbers on what does this mean? Mortgage fraud is increasing by the day. There was an article released recently that they're estimating $3 billion worth of mortgage fraud across the majors. So that's your NABS, your CBAs, ANZs, Macquarie's.
• 5:32
  Now, one of the big things that came out in the article that recently got released is it is AI driven where documents are getting falsification of documents, where that being a pay slip, bank statement, employment details. How much of a concern do you see that from a regulatory perspective?
• 5:50
  When you think fraud, you think these serious offences, you think people are money laundering, those sorts of things, but it's not. It's your everyday misdemeanors. You could almost say that's where your boss might increase your payslip or you've falsified your spending habits.
• 6:10
  those sorts of things, or you get an accountant to sign off on your ability to service that trust, that's fraud, right? So they're the cases that when I read that article, looking into it, I'm like, what's going on? Is there a lot of international fraud, a lot of money coming into Australia that shouldn't be? It's not that. It's your everyday mom and dad investors that are misreporting or falsifying some documentation to get more debt. So what does it mean? It just means banks' ability to assess individuals is going to become...
• 6:38
  better than ever. You know, they're getting access to information. So the ability to get credit is only going to get harder as AI improves. And so you're going to see credit starting to tighten. We're seeing that across the board. And I think in the next 12 to 18 months, getting debt is going to become increasingly harder
• 6:56
  from the major and your first tier lenders. You're going to see a rise in private funders and second tier lenders as the major four start to clamp down on giving out access to credit, as we discussed with AI and fraud and those sorts of things. Your private lenders, your second tier institutes will start to mop up and open up the floodgates.
• 7:20
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• 8:04
  It's going to be interesting to see from the fraudulent activity whether that does see a spike in adverse credit or bad credit. NAB recently came out with an article saying that they've increased their bad debt forecast this year from $706 million to $300 million. Off the back, what they're saying is off the back of the Iran war and global conditions, Westpac and CBA have had similar articles recently as well, but...
• 8:30
  does feel like there could be some correlation between the mortgage fraud as well. Yeah, and we've got stagnant markets in the likes of Sydney and pockets of Queensland, New South Wales and Victoria, right? So what happens? When the markets are rising, these default stories aren't as common because price growth and equity is overshadowing any sort of default payments or anything like that, right? But now we've got stagnant markets and markets are coming backwards and
• 8:57
  Those that have fraudulently falsified documentation to get debt when they probably shouldn't or had the ability to get that debt so their income wasn't high enough, et cetera, of course it's going to increase in defaults. And when you don't have markets, record growth year on year market growth to support your portfolio, you're going to see more defaults and it's a little bit concerning, Rhys. I'm not going to lie.
• 9:20
  It definitely is concerning just because of the Iran war has only been going, what, six, eight weeks at this stage. So for NAB to come out and more than double their increase in bad debt this year shows they're probably already seeing a tick up in arrears on their current book, particularly in certain cohorts as well. So obviously we mentioned.