September 06, 2022
At its September monetary policy meeting, the Reserve Bank of Australia (RBA) again raised the nation’s official cash rate by 50 basis points 2.35%.
Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Today’s 50 basis point increase in the official cash rate comes as no surprise given recent economic conditions. New retail sales data published by the Australian Bureau of Statistics show that despite a strong labour market and rising interest rates, households are continuing to spend.”
PropTrack economist Eleanor Creagh said, “The economy has entered the tightening cycle with strong momentum ... These conditions have allowed the RBA to continue raising the target cash rate toward their estimates of the neutral rate (2.5–3.5%), while monitoring the evolution of household spending as interest rates rise – a key source of ongoing uncertainty.
“However, the lagged effect of rate rises, large share of variable rate borrowers ahead on repayments and borrowers on fixed terms yet to expire, means many mortgage holders have not yet felt or are only now beginning to feel the impact of the initial rises. Meaning that strong momentum is likely to begin to fade as consumer spending slows once the effect of rate rises is actually felt.”
“When you look at the home loan market right now, there’s a strong case to be made for borrowers to work with their brokers to review their home loans and get a more competitive deal,” said Waldron. “Many lenders are offering cash backs to entice borrowers to switch and attractive home loan rates for new customers. It’s worth chatting to your broker about whether there’s a more competitive home loan out there for you.”
Mortgage Choice data on all loans submitted by its brokers across Australia over August reveals that demand for refinancing remains high, with 41% of borrowers switching lenders during August. The data also shows that demand for fixed rates has fallen to a new low, with only 3% of borrowers opting to fix part or all of their loan in August.
Lending Indicators data from the Australian Bureau of Statistics showed that the value of new loan commitments for housing fell 8.5% in July. This included a fall of 7.0% in the value of new loans to owner-occupiers and an 11.2% fall in investment loans. The number of new loan commitments to first home buyers fell 10.7% over July and was 35.9% lower compared to a year ago.
The latest property market data from the PropTrack Home Index showed that Australian home prices fell in August and are now 2.7% below their peak, retracing their early 2022 gains. All capital cities are now below their price peaks; however, prices in regional areas remain up almost 50% since March 2020.”
Ms Creagh said, “The good news for buyers is this spring is set to be much less competitive than last. There’s a lot more choice and less competition, which could create opportunity for some. The balance in market conditions could make it easier to get into the market, stock isn’t moving as quickly and the fear of missing out has subsided. The total number of properties listed for sale on realestate.com.au is up nearly 5% compared to a year ago. For those ready to purchase, this extra choice could create opportunity, particularly in Sydney and Melbourne where we’ve seen the largest increase in options.”
Mr Waldron said, “I encourage anyone considering buying a home this spring to meet with their mortgage broker and understand their finance options.”
