The latest rate hike will add $ 159 a month to repayments for a homeowner with an average home loan of $ 600,000, according to figures from comparison website Finder.
“While it will be difficult for a lot of people who have never seen a rise in interest rates before, and there will be some adjustment, I don’t think there will be any problems in general,” Emmett said.
AMP Capital chief economist Dr Shane Oliver expected average house prices to fall by 10 to 15 per cent for 18 months, as predicted earlier, but said this could happen sooner. and faster.
Oliver noted that falling house prices and weak consumer confidence suggested that rising rates were having an earlier impact than had been seen in previous cycles. He attributed this to higher levels of household debt, the sharp rise in fixed mortgage rates long before any increase in cash rates and the pressures of the cost of living that had seen a fall in real wages and purchasing power.
Independent economist Saul Eslake said the RBA had more than completely reversed the cuts made at the start of the pandemic, when the cash rate fell by 75 basis points. With more rate hikes to come, buyer demand and property prices will be affected.
“It simply came to our notice then [price] descents that began in Sydney and Melbourne a few months ago and now includes Canberra. This is likely to extend to other capitals and regional areas where, according to CoreLogic, prices were still rising in May, “he said.
Price falls are expected to accelerate in markets such as Sydney and Melbourne and spread to other cities and regions. Credit: Peter Rae
However, Eslake did not expect a big drop in prices. He said he would be surprised if the market fell more than 10 percent as rates rose, and also noted that forced selling, which would increase supply, was unlikely.
Instead, he expected the number of homes for sale to drop sharply as sellers became reluctant to sell in a refrigeration market. This would reduce supply and limit the fall in prices.
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Gareth Aird, head of the Australian economy at the Commonwealth Bank, lowered his house price forecasts after the latest rate hike.
Domestic house prices are now expected to fall by 15 per cent by the end of 2023. Sydney and Melbourne prices were expected to fall further, with Aird predicting 18 per cent falls.
“Sydney prices were already falling, as was Melbourne, but we will see prices fall further and the pace of falls will accelerate with higher interest rates,” Aird said.
An earlier forecast that domestic real estate prices would end the year smoothly, and then fall by 8 to 10 percent next year, had been based on a more gradual increase in rates.
Although the projected falls were significant, the contraction followed the extraordinary price gains in 2021 and was a natural response to rising interest rates, as it was the historic low rates that drove the ‘rising prices in the first place.