‘Helps take pressure off’: Why house prices could slow down

suggests borrowing power could drop by about $71,000 if the cash rate reached 1.75 per cent by early 2024, as forecast by Westpac.

Commonwealth Bank head of Australian economics Gareth Aird said record-low rates were the single biggest driver of strong property price growth during the pandemic because they enabled people to borrow more, pushing up prices.Rising interest rates would have the reverse effect, reducing demand for credit and cooling the housing market, Mr Aird said, meaning buyers in turn would not need to borrow as much.

Mr Aird noted the cash rate would still be low even after multiple hikes, forecasting rates would start rising in August and reach 1.25 per cent by mid-2023.Still, his previous price forecasts of another 7 per cent growth this year before a decline of up to 10 per cent in 2023 could be brought forward by an earlier rate hike, which he previously pegged for November, still well ahead of the 2024 timeline flagged by the RBA.

Though rising fixed rates and the increase to the serviceability buffer were already limiting borrowing power, a lift in the cash rate would affect more buyers, Dr Oliver said. First-home buyers, who tend to stretch themselves the furthest to get into the market, would likely be the hardest hit, but investors and upsizing owner-occupiers taking on a large amount of debt to upgrade, would also feel the change.

“It’s going to slow growth down,” he said. “But unfortunately, it’s most likely to affect first-home buyers … because they’re the ones that are taking out the big mortgages.”

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They’ve been predicting the end of property for a decade now.

Fake news.

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Source: 7NewsAustralia - 🏆 11. / 71 Read more »