The RBA took the cash rate to 2.35%, the highest level since January 2015, still below the pre-COVID decade average of 2.56%.
What to anticipate?
We can assume that the latest cash rate rise will be passed on to mortgage rates in full, taking the average variable mortgage rate for a new owner-occupier loan to around 4.51% or for existing borrowers 4.99%, up from 2.41% in April this year.
With an increase in mortgage interest rates, you can expect a reduction in borrowing capacity, placing further pressure on buyers’ confidence and property prices.
CoreLogic’s estimate of national home sales over 3 months to August 2022 was 14.8% lower than for the same period a year ago, emphasising lower buyer demand.
The coming months will be interesting as we move into the traditional selling season, where more properties will hit the market and, at the same time, strong probability of further interest rate rises.
What about housing prices?
The RBA mandate does not consider housing prices, as its key focus is on inflation and labour market conditions.
The good news is the RBA believes inflation will find a peak towards the end of the year, hoping the cash rate will stabilise as inflation reduces to an acceptable 2-3% pa.
The Australian residential sector is estimated to be valued at $10 Trillion. Individual wealth in real estate holds an important role in the broader economy.
