Since commencing the tightening cycle back on 5 May 2022, the cash rate has risen by 175 basis points; but despite the rapid hike, the cash rate remains well below the pre-COVID decade average of 2.56%.
The RBA is clearly prioritising fighting inflation over supporting the housing sector and any temporary slowdowns in overall economic activity, as the cash rate approaches a contractionary setting later this year.
If house prices fall and mortgage repayments rise, it might help to limit inflation through wealth effects and may also reduce household spending.
The Reserve Bank of Australia believes that inflation will be back at 2-3% by the end of the year and the cash rate may retreat somewhat through the second half of next year.
The cash rate is forecast to peak at 3.32% in March next year and fall back to 2.99% by the end of 2023.
Today’s rate hike, which is likely to flow through in its entirety to variable mortgage rates within a matter of days, paints a weaker picture for the housing sector.
Higher interest rates have already had an immediate downside impact on housing values, with CoreLogic’s combined capital cities index peaking shortly after the first-rate on hike in May.
Since that time, dwelling values across the combined capital cities index are down -2.8% to 1 August, after rising 25.5% through the recent upswing.
According to most bank forecasts, the cash rate could rise at least another 75 basis points before peaking.
With this in mind, the decline in housing values is expected to become steeper and geographically more widespread.
Sydney home values are already falling at the fastest pace since at least the early 1980s, with most of that decline (4.8%) occurring since May’s cash rate increase.
Home prices will be influenced by how quickly interest rates rise and how high they go, as well as the performance of the broader economy, available employment opportunities and demographic trends.
As the cash rate finds a ceiling, housing values should find a floor.
Published:Wednesday, 3rd Aug 2022
Source:
Australia Gears Up for Comprehensive Financial System Resilience Assessment in 2025 27 Mar 2024: .Paige Estritori The Australian Prudential Regulation Authority (APRA) is positioning itself to inaugurate a widescale diagnostic of the nation's financial heartbeat in the year 2025. This financial health check aims to meticulously analyze the repercussions of unanticipated events on the country's financial stability beyond merely scrutinizing the banking sector. - read more |
Climbing Mortgage Arrears Signal Heightened Financial Strain 26 Mar 2024: .Paige Estritori Australian households are navigating a more complex financial landscape as mortgage arrears have climbed to a peak not seen since the outset of the COVID-19 pandemic, according to a new report from Fitch Ratings. The Fitch's Dinkum RMBS index has indicated that, as of the last quarter of 2023, households are falling behind on mortgage payments more frequently, sparking concerns about financial resiliency amid ever-tightening economic conditions. - read more |
New Investment Approach for Australian New Homebuyers 25 Mar 2024: .Paige Estritori Recent statistics have highlighted a notable shift in the strategies Australian first-time homebuyers are using to infiltrate the challenging property market. Analysis of 2023's purchasing trends indicates an emerging investor mentality among new buyers. - read more |
Rentvesting Trend: First-Time Buyers on the Property Ladder. 24 Mar 2024: .Paige Estritori New insights from financial data show an intriguing pattern among Australian first home buyers in the recent year, with investment-savvy superstars choosing to become landlords right from the start. A striking one in five opted to dive into the property market, not for immediate residence but investment potential in 2023, indicating a significant shift in home ownership approaches. - read more |
Australia Braces for Economic Shift as Rate Cuts Loom Amidst New Challenges 21 Mar 2024: .Paige Estritori Rising tensions within various sectors of Australia's economy signal a possible series of interest rate reductions by the Reserve Bank of Australia (RBA). Significant indicators, including increased unemployment rates, forecast a shift in monetary policies possibly leading to a period of lesser rates as experts observe a pre-emptive response to economic stagnation under the current administration. - read more |
5 Mistakes to Avoid When Applying for Caravan Finance Embarking on the journey of owning a new caravan is an exhilarating moment filled with visions of open roads and the unparalleled freedom of exploration. The thrills of planning road trips, creating a home away from home, and the anticipation of adventure are ample reasons to consider purchasing a caravan. - read more
|
From Pre-Approval to Purchase: Your Roadmap to Caravan Finance Imagine the open road before you, the comfort of your home on wheels behind you, and the promise of adventure at each destination. Owning a caravan offers unparalleled freedom and joy, allowing you to explore the countryside and make memories that last a lifetime. However, the path to purchasing the caravan of your dreams often begins with navigating the financial aspect of ownership. In this article, we delve into the exciting journey of caravan finance. - read more
|
Budgeting for Your Australian Caravan Adventure The lure of the vast Australian landscape stretches far and wide, captivating the hearts of travelers and adventure seekers alike. There's a growing trend among explorers to embrace the caravan lifestyle, seeking freedom and the joy of the journey rather than just the destination. The open road beckons, promising the comforts of home coupled with the excitement of the unknown, and Australia’s caravan culture reflects this unique blend of security and adventure. - read more
|
8 Tips to Get the Best Deal on Your New Caravan If you’re thinking about buying a new caravan, then the chances are you’re excited about all the adventures you’re going to have with your family in tow. You’re also probably itching to start planning some great getaways, and of course, you want to get the best deal you can on the caravan itself. Perhaps these tips help you on the journey. - read more
|
Choosing the Perfect Caravan: A Comprehensive Checklist Planning a caravan trip can be an exciting and fun experience for families or individuals, but choosing the right caravan is crucial to ensuring that the trip is as enjoyable as possible. There are numerous types, models, and sizes of caravans available, and this can be overwhelming for many people. That's why this article has been created. It aims to provide a comprehensive checklist and valuable advice to help you choose the perfect caravan that suits your needs and preferences. - read more
|