There are widespread expectations interest rates will stay where they are when the Reserve Bank of Australia meets tomorrow.

But some experts also believe Australians are edging closer to a rate rise.

Financial planner Peter Horsfield believes the RBA will keep rates on hold this month but will be forced to act on what is seen as a growing bubble in the property sector created by high real estate prices.

“The property sector has is becoming over-stimulated in terms of affordability,” he says.

“There’s a lot of talk about unaffordability for first-home buyers.”

Some experts also believe Australians are edging closer to an interest rate rise.

A glut of property investors and speculators are to blame for the overheated property market, Horsfield says.

Read more: What you need to know about interest rates

Many over-enthusiastic investors may find themselves in hot water when interest rates rise, he warns.

“We saw this during this the GFC when people who had over-geared and taken greater and greater risks had everything come crashing down around their ears,” he says.

Horsfield says he has been advising clients to pay off as much of their mortgages as they can while interest rates remain so low. He says investors should hold back until rental yields – which have been as low as 4% and 5% across Sydney and Melbourne – begin to show more growth.

“Rental yields are thin because property prices are so high,” he says.

“We know a correction will happen and people who have over-geared will have to get out. There will be fire sales and people will be able to pick up bargains.”

© 2014 Leader Capital Real Estate, Powered by AIMSFUN PL | Privacy & TermsDisclamer | User Login