OUR RATE RISE RISK
HOME value growth is at its peak in Hobart and around much of the rest of the country, too — but experts say the boom won’t last forever.
In Finder’s RBA Cash Rate Survey, 40 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy.
While every expert surveyed predict the cash rate to hold, nearly half of those who weighed in on property prices believe Australia’s current house price growth is unsustainable and even a small rate increase could cost mortgage holders tens of thousands in interest.
University of Tasmania senior lecturer in macroeconomics, Mala Raghavan, said buyers may put themselves at risk by acting too hastily.
“The recent uptick in buying behaviour largely appears to be due to the fear of missing out, and many buyers are rushing into the market without clear foresight of the impending risks,” she said.
“When mortgage rates start rising, many households will risk being unable to service their loans, and could be vulnerable to foreclosures,” she said.
Graham Cooke, head of consumer research at Finder, said rock-bottom rates, government stimulus and a fear of missing out had “lit a fire” under the belly of the property market.
“Listing numbers are unable to meet high buyer demand, keeping inventory levels low overall and adding to the sense of urgency among buyers,” he said.
“We’ve seen more borrowed for housing over the last six months than during any similar period in history and economists have tipped us to borrow more over the next six.
“However, the view from our panel is that this fast-paced growth will not continue indefinitely.
“It’s unlikely we’ll see any regulatory intervention from policymakers yet, but this might be a possibility down the track.”
While experts agree the RBA is unlikely to increase the cash rate for a while yet, this doesn’t mean mortgage holders can rule out an out-of-cycle rate hike.
UBank announced an out-of-cycle move late last week, increasing its threeyear fixed rate from a near market-leading 1.75 per cent to 1.85 per cent.
Westpac also bumped up its fixed-term rates last Friday.
Finder’s Consumer Sentiment Tracker, a survey of 7,191 mortgage holders, found a monthly raise of $200 or less would cause financial distress for two in five mortgage holders (41 per cent).
Mr Cooke said that while the cash rate isn’t going anywhere, that doesn’t mean home loan rates will stay put.
“The last time the cash rate was held for an extended period of 34 months, banks changed their interest rates on average 7 times – 5 of which were increases,” he said. “It’s important that homeowners factor in potential rate increases when applying for a mortgage — keeping a cushion can keep your budget from getting dicey down the track.”