The good news is that house prices will land sooner than expected. The bad news is that the landing will be harder.
Where previously the experts had expected prices to fall consistently, but relatively gradually, for the remainder of this calendar year and next, they have pulled that timetable forward.Even those homeowners without mortgages, or those with big mortgage buffers, can’t escape the negative wealth effect of lower house prices.
Painful as this will be to some mortgage holders, for the RBA, this represents positive pain – the kind that borrowers need to endure to fix the economy’s more dangerous ailment, inflation.With inflation breaking its own records, running at its highest pace in 21 years, its treatment needs to be painful.
There is little or no evidence to date from banks that delinquencies from home loans have grown; there are even suggestions they have fallen since the RBA began boosting interest rates in May.
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