November 01, 2022
At its November monetary policy meeting, the Reserve Bank of Australia (RBA) raised the nation’s official cash rate by 25 basis points to 2.85%.
Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Today’s decision from the Reserve Bank will come as unwelcome news to borrowers and hopeful buyers alike.
“While last month saw a smaller-than-expected rate increase from the RBA, most lenders moved quickly to pass on the cash rate rise to their customers and I suspect this month will be no different.
“We continue to see some lenders offering significant discounts on new loans, making it more important than ever for borrowers to stay on top of their interest rate and ensure they’re still getting a good deal.”
Mortgage Choice home loan submission data showed a small uptick in the proportion of loans with a fixed component during October. In September, just 4% of loans submitted by Mortgage Choice brokers had a fixed component, this rose to 6% in October.
“The rise in demand for fixed rate loan products is unsurprising in an environment where rates look set to rise for some time yet. Borrowers are understandably seeking certainty in their home loan repayments,” said Mr Waldron.
The latest PropTrack Home Price Index revealed that home prices stabilised in October, with national dwelling values falling just 0.06%, the smallest fall since national home prices peaked in March 2022.
Eleanor Creagh, PropTrack Senior Economist said, “The fastest rise to the cash rate since 1994 has quickly rebalanced the housing market from last year’s extreme growth levels, with prices falling from their peak nationally. Prices nationally are now sitting 3.53% below their March 2022 peak. As borrowing capacities are constrained and buyers’ budgets shrink, the most expensive markets of Sydney and Melbourne are leading the price declines, and in Sydney prices are down more than 6% from peak and below levels recorded in October last year.
“From here further rate rises will increase borrowing costs and reduce maximum borrowing capacities, weighing further on prices. However, this will be offset by tight rental markets and rental price pressures, rebounding foreign migration, low unemployment, and housing supply pressures.”
Mr Waldron said, “As we approach the end of the year, I urge all borrowers to take stock of their financial position, to ensure they’re starting 2023 on the right foot. Those who haven’t had their home loans reviewed this year and those looking to buy in the coming months should speak to their broker to ensure they understand how the rising interest rate environment will affect them.”
