Rate hike “necessary” to cool the real estate market

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Almost a third of Australians would be happy to see interest rates rise to help calm the housing market.

While figures released on Monday showed house price growth was slowing, national home values ​​were 21.6% higher during the year.

The CoreLogic report also showed that in October, half of the national capitals had grown by more than 20% in the past year.

Faced with this sharp deterioration in housing affordability, a survey by financial comparison site Canstar found that 29% of Australians believe lenders should raise interest rates to cool the housing market.

The survey of 1,280 Australians also found that while an additional 22% agreed the market needed cooling, they didn’t think rate hikes were not the way to go.

Of that group, 36% wanted additional support for first-time buyers, 33% wanted tighter restrictions for investors, and 30% called for making long-term rentals more attractive through longer leases.

Canstar Group leader for financial services Steve Mickenbecker said those who support a rate hike should “be careful what they want.”

“An increase in interest rates from today’s ultra-low levels will push many homeowners into mortgage stress,” he warned.

For a residential borrower with a $ 500,000 average variable rate loan, a 0.25% rate hike would increase their monthly repayments from $ 68 to $ 2,206.

The inquiry comes as the Reserve Bank of Australia held its monthly board meeting, with economists predicting that the central bank will present guidance for its first cash rate hike after the inflation figures from the last week.

For months, RBA officials insisted not to expect an increase until 2024.

However, lenders have already increased their fixed rate mortgages.

“The trend for lenders to increase fixed interest rates for terms longer than 12 months also suggests a higher cash rate sometime in 2023,” Mickenbecker said.

The banking watchdog has already stepped in to moderate real estate activity, increasing the minimum interest cushion it expects banks to use when assessing the viability of mortgage loan applications.

The Australian Prudential Regulation Authority wants banks to assess claims at a rate three percentage points higher than the proposed interest rate product, instead of 2.5 percentage points previously.

Shadow Treasurer Jim Chalmers said it was a big step in tightening loan deals.

“It certainly won’t solve all the problems in the housing market,” he told ABC radio.

But he said Labor would not go to the next election with the same negative gear policies adopted in the last poll.

“We looked at it well, thought about it a lot and decided to go on another track,” he said.


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