Further interest rate hikes could ‘devastate’ property market without easing unaffordability
Summary
The Reserve Bank of Australia (RBA) is expected to raise interest rates again, which will increase mortgage costs and could hurt the property market. Experts warn that higher borrowing costs will keep housing unaffordable for many Australians, despite possible drops in home prices.Key Facts
- The RBA may increase its cash rate from 4.35% to 4.6% soon, adding about $100 per month to mortgage payments on a $700,000 loan.
- Two or three more rate hikes could cause a bigger drop in home prices, possibly between 15-20%.
- The cash rate may reach levels not seen since before the 2008 global financial crisis.
- Higher rates will make it harder for households with mortgages to manage their debt.
- The national housing affordability index is at its lowest point in history.
- Falling home values could help first-time buyers, but rising interest rates offset this benefit.
- The shortage of rental properties is causing rents to increase, affecting renters as well.
- Experts say rising borrowing costs will prevent any improvement in housing affordability for the foreseeable future.
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