Soaring interest rates have halved the pace of home loan growth in just six months as the Reserve Bank’s war on inflation pulled the rug out from under the country’s once-booming housing market.
Borrowing behaviour is closely linked to changing rates and the likely increase in the benchmark lending rate to 3.85 per cent – it stands at 3.1 per cent – will put further pressure on home loan demand, ANZ economists say. With housing prices expected to double the 8 per cent-plus declines they have already seen to date, the market is headed for its steepest downturn since the early 1980s, offering a reset in prices that– if they are willing to accommodate further price falls.
Housing values have also been falling as the volume of money chasing dwellings has shrunk. As of Friday, data provider CoreLogic’s daily home value index shows an 8.8 per cent decline in values across the five mainland state capitals since the peak in early May, when the cash rate started rising.