AfterEvlin DuBose · · 3 min of reading
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Despite the 3.75% Reserve Bank rate hike behind us, the housing market appears to have recovered significantly, showing critical signs of life such asraising the auction approval rateand recovery of capital value.
So why are Australians still buying property, despite high financing costs?housing loan?
Why are house prices rising again? Assets are coming back despite the RBA's efforts
TheReserve Bank of Australia(RBA) is hitting inflation hard with the monetary hammer, leading the wayInterest ratesto heights not seen since 2012. But while that added thousands to mortgage costs across the country, house price growth appears to be on the rise again after a weak year.
But don't be fooled, warns Mozo banking expert Peter Marshall. This regrowth is not sustainable.
"Rate hikes aren't affecting homebuyers that much right now," Marshall explains.
"Of course, he will to some extent. If rate hikes weren't happening, house prices would already be skyrocketing, but rate hikes just keep it going a little slower than it would otherwise.”
Instead, this current revival has been fueled by an influx of immigrants and cash-strapped renters ready to leave their old lifestyles behind—two groups of people unlikely to feel the burn from rising prices.
"Buying a house is a long-term proposition, and the future of prices is probably - for people who can afford it now - relatively less of an issue," says Marshall.
"I don't think rates at this level are doing much to change people's behavior in the housing market."
The scarce supply of apartments and the high demand of these groups can largely explain the marginal increase in real estate growth. However, as soon as that demand diminishes, the creators of the next real estate boom - owners and tenantsfirst home buyers– their path to the market will continue to be hindered by high interest rates, and this will probably cool things down again. The momentum we're seeing right now may be short-lived.
Could rising house prices make inflation worse?
Of course, the conundrum for many is, "If house prices rise, would that worsen inflation and cause more RBA rate hikes?" That's a valid question. Growth in the housing sector could certainly contribute to inflation - which the RBA is desperate to control.
However, Marshall concedes that the central bank is not thinking about asset growth – or indeed affordability – when it comes to the hikegotovinska stopa. It is purely a matter of inflation, and inflation is only predicted to moderate in 2024 - for reasons that may have nothing to do with the RBA.
"It is not clear how much of an impact the RBA's actions have had on the economy," says Marshall. "But it's probably pretty minimal."
Marshall predicts the central bank has one or two more hikes, holding off in June rather than waiting for winter wages and employment data. This could putthe top of the exchange rate cycleto 4.10% or more by the end of winter.
"It's possible the RBA will move in July or August - in fact, it's very likely we'll see another rate hike," says Marshall.
“The May rate hike surprised many economists, but I thought the RBA probably got it right. Giving in too soon would send the wrong message to people.”
Instead, the central bank made it clear that the message was: cut spending, leave your money insavings account, and take care of your ownmortgage repayments. Whether or not home buyers will hear is another matter.
Unsatisfied with your mortgage? Comparerefinance housing loansin the table below.
Compare home loans for refinancers- last updated on May 29, 2023
Search the featured home loans below or do the whole Mozodatabase search.Advertiser Post
Equipped product
(Video) RBA Cash Rate October 2022: How To Stop Inflation Psychology!Mozo experts' choice awards were won by:
- Low housing loan - 2023
For more information about these awards, go to the link at the bottom of this table.
Unloan Variable
Owner, refinance only, LVR <80%
interest rate
comparison rate
Initial monthly payment
4,99%per year. variable
4,90%per year.
Only for refinancers. Built by CommBank, Unloan is the first home loan with an ever-increasing discount (conditions apply) for borrowers. There are no applications or bank fees. There are no monthly account maintenance or early exit fees. Apply in just 10 minutes.
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Unloan Variable
Only for refinancers. Built by CommBank, Unloan is the first home loan with an ever-increasing discount (conditions apply) for borrowers. There are no applications or bank fees. There are no monthly account maintenance or early exit fees. Apply in just 10 minutes.
- interest rate
- 4,99%per year. variable
- comparison rate
- 4,90%per year.
- Current fees
- 0.00 dollars
- Severance pay
- 0.00 dollars
- Additional repayments
- yes - free of charge
- Cross out the object
- yes - free of charge
- Debit account
- Yes
- Maximum loan-to-value ratio
- 80,00%
- minimum loan amount
- 10,000 dollars
- maximum loan amount
- 3,000,000 dollars
- type of mortgage
- Variable
- Types of repayment
- Principal and interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, fortnightly, monthly
- Special offers
- -
Read our Mozo review to learn more aboutUnloan Variable
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Mozo experts' choice awards were won by:
- Low housing loan - 2023
- Compensated housing loan - 2023
- Loan for the purchase of the first house - 2023
- Stambeni kredit za investitore - 2023
- Home Lenders Bank of the Year - 2023
For more information about these awards, go to the link at the bottom of this table.
Express housing loan
Owner, principal and interest
interest rate
comparison rate
Initial monthly payment
(Video) RBA's Shocking Interest Rate Hike: Impact on Mortgages, Inflation, and the Australian Economy5,47%per year. variable
5,62%per year.
Get fast online approval in just one hour with Bendigo Bank Express Home Loan. Only available for new home loans. Optional offset account for even greater savings. Flexible repayment options. A 10% deposit is required.
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Express housing loan
Get fast online approval in just one hour with Bendigo Bank Express Home Loan. Only available for new home loans. Optional offset account for even greater savings. Flexible repayment options. A 10% deposit is required.
- interest rate
- 5,47%per year. variable
- comparison rate
- 5,62%per year.
- Current fees
- 10.00 dollarsper month
- Severance pay
- 350.00 dollars
- Additional repayments
- yes - free of charge
- Cross out the object
- yes - free of charge
- Debit account
- And
- Maximum loan-to-value ratio
- 90,00%
- minimum loan amount
- 5000 dollars
- maximum loan amount
- 3,000,000 dollars
- type of mortgage
- Variable
- Types of repayment
- Principal and interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, fortnightly, monthly
- Special offers
- -
Read our Mozo review to learn more aboutExpress housing loan
Go to the page
Neat housing loan
Owner, principal and interest, LVR <60%
interest rate
comparison rate
Initial monthly payment
5,49%per year. variable
5,51%per year.
A loan with a variable interest rate at a competitive price. Ideal for owners and investors. There are no service fees. Make free additional repayments and redraws. Flexible repayment schedule available.
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(Video) RBA Is Increasing Interest Rates To Counter Inflation - But What Will This Do To Your Home Loan?Neat housing loan
A loan with a variable interest rate at a competitive price. Ideal for owners and investors. There are no service fees. Make free additional repayments and redraws. Flexible repayment schedule available.
- interest rate
- 5,49%per year. variable
- comparison rate
- 5,51%per year.
- Current fees
- 0.00 dollars
- Severance pay
- 300.00 dollars
- Additional repayments
- yes - free of charge
- Cross out the object
- yes - free of charge
- Debit account
- Yes
- Maximum loan-to-value ratio
- 60,00%
- minimum loan amount
- 80 thousand dollars
- maximum loan amount
- 5,000,000 dollars
- type of mortgage
- Variable
- Types of repayment
- Principal and interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, fortnightly, monthly
- Special offers
- -
Read our Mozo review to learn more aboutNeat housing loan
Go to the page
Compensation housing loan
Package, owner, LVR<60%, principal and interest
interest rate
comparison rate
Initial monthly payment
5,54%per year. variable
5,79%per year.
The possibility of opening up to 10 direct accounts per credit account. Quick online registration. Linked Debit Mastercard® with free ATM access across Australia. Bundle a credit card with your home loan and you'll pay no annual card fee (terms and conditions apply). A 40% deposit is required.
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Compensation housing loan
The possibility of opening up to 10 direct accounts per credit account. Quick online registration. Linked Debit Mastercard® with free ATM access across Australia. Bundle a credit card with your home loan and you'll pay no annual card fee (terms and conditions apply). A 40% deposit is required.
- interest rate
- 5,54%per year. variable
- comparison rate
- 5,79%per year.
- Current fees
- 248.00 dollarsper year
- Severance pay
- 400.00 dollars
- Additional repayments
- yes - free of charge
- Cross out the object
- yes - free of charge
- Debit account
- And
- Maximum loan-to-value ratio
- 60,00%
- minimum loan amount
- 150 thousand dollars
- maximum loan amount
- 10,000,000 dollars
- type of mortgage
- Variable
- Types of repayment
- Principal and interest
- Availability
- Owner Occupier
- Repayment options
- Per month
- Special offers
- -
Read our Mozo review to learn more aboutCompensation housing loan
Go to the page
(Video) Housing downturn deepens as RBA continues rate hikes | ABC News | The BusinessEquipped product
Mozo experts' choice awards were won by:
- Low housing loan - 2023
For more information about these awards, go to the link at the bottom of this table.
Unloan Variable
Investment, only refinancing
interest rate
comparison rate
Initial monthly payment
5,29%per year. variable
5,20%per year.
Only for refinancers. Built by CommBank, Unloan is the first home loan with a growing discount (conditions apply) for investors. There are no applications or bank fees. There are no monthly account maintenance or early exit fees. Apply in just 10 minutes.
Compare
Compare
Go to the page
detailsClose
Unloan Variable
Only for refinancers. Built by CommBank, Unloan is the first home loan with a growing discount (conditions apply) for investors. There are no applications or bank fees. There are no monthly account maintenance or early exit fees. Apply in just 10 minutes.
- interest rate
- 5,29%per year. variable
- comparison rate
- 5,20%per year.
- Current fees
- 0.00 dollars
- Severance pay
- 0.00 dollars
- Additional repayments
- yes - free of charge
- Cross out the object
- yes - free of charge
- Debit account
- Yes
- Maximum loan-to-value ratio
- 80,00%
- minimum loan amount
- 10,000 dollars
- maximum loan amount
- 3,000,000 dollars
- type of mortgage
- Variable
- Types of repayment
- Principal and interest
- Availability
- Investor
- Repayment options
- Weekly, fortnightly, monthly
- Special offers
- -
Read our Mozo review to learn more aboutUnloan Variable
Go to the page
*WARNING: This comparison rate only applies to the example or examples provided. Different amounts and terms will result in different comparative rates. Costs such as redraw fees or prepayment fees and savings such as fee waivers are not included in the comparison rate, but may affect the cost of the loan. The comparative rate shown is for a secured loan with monthly principal and interest payments of $150,000 over 25 years.
**The initial monthly payment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges, and thus the total cost of the loan, can vary depending on the loan amount, loan term and credit history. Actual repayments will depend on your personal circumstances and changes in interest rates.
^See information onMozo Experts Choice Home Loan Awards
Mozo provides general product information. We do not take into account your personal goals, financial situation or needs and do not recommend any specific product. You should make your own decision after reading the PDS or tender documents or seek independent advice.
While we pride ourselves on covering a wide range of products, we do not cover every product on the market. If you choose to apply for a product through our website, you will be dealing directly with the provider of that product, not with Moz.
FAQs
Are RBA rate hikes actually stopping housing inflation? ›
Are RBA rate hikes actually stopping inflation in the housing market? Despite 3.75% worth of Reserve Bank rate rises behind us, the housing market seems to have made a remarkable recovery, showing critical signs of life such as lifting auction clearance rates and a rebound in capital values.
How does a rate hike affect the housing market? ›Mortgage rates remain high. After peaking in November 2022 at 7.08%, the average 30-year mortgage rate in the U.S. dropped to 6.09% in early February 2023, but has been up and down since, standing at 6.39% as of mid-May 2023. Higher mortgage rates make borrowing more costly, which can dampen housing market activity.
Is it good to buy a house during high inflation? ›If you buy now, your money might have more buying power. As inflation continues to rise your money buys less. If you act now, then, you might be able to afford more home with your dollars than you would if you wait and inflation continues to rise. During inflationary times, monthly apartment rents tend to rise, too.
How high will interest rates go in 2023 Australia? ›The big four banks have all cast their predictions for the next few years of cash rate movements. For the average owner-occupier paying a variable rate, your home loan rate could reach 6.86% in 2023.
Will the RBA pause interest rates? ›RBA's wait and see
However, the board ultimately decided to "pause" after 10 consecutive increases since May 2022 because policy had been "tightened significantly in a short period".
This reduction in demand then results in a drop in home prices. When the Fed increases rates to slow down the economy, particularly in times of inflation, the above goal is what it's looking for; a reduction in consumer spending that results in a drop in prices.
What happens to the housing market when the Fed raises interest rates? ›Therefore, a higher federal funds rate means higher mortgage rates for buyers. This has several effects: You wind up qualifying for a lower loan amount. The amount of a preapproval from lenders is based on both your down payment and the monthly payment you can afford based on your debt-to-income ratio (DTI).
How high will interest rates go 2023? ›With the next Federal Reserve meeting coming up on May 3, 2023, it's uncertain if the Fed will keep interest rates in a holding pattern through the spring. Both the Fed and experts are predicting another 0.25% rate hike for May.
Are interest rates going to go back down in 2023? ›When it becomes more attractive to save money, consumers tend to spend less of it. But the Fed isn't done fighting inflation. And because of that, consumers should not expect interest rates to drop in 2023. However, rates may also not climb much from where they are today.
Will interest rates go down in 2023 2024? ›The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.
How high will interest rates go Australia? ›
Westpac: Westpac predicts the cash rate will remain at its current peak of 3.85% and will stay there for the remainder of the year, before falling again by 25 basis points by March 2024, to 3.60%. Westpac predicts continued cuts to follow throughout 2024.
What is the real interest rate in Australia? ›Basic Info. Australia Real Interest Rate is at 1.65%, compared to 3.37% last year. This is lower than the long term average of 4.80%.
How high will interest rates go? ›Indeed, at its last interest rate review the BoE said it doesn't expect to hit the 2% target until the end of 2024. Instead it forecasts inflation will fall to 8% in the third quarter of 2023, and to 5% by the end of the year. This suggests interest rates could continue climbing or at the very least, stay high.
Will inflation cause a housing crash? ›However, as high inflation costs press down on buyers, it could depress home values. Although he doesn't expect a major housing market crash, Buehler says he sees home values flattening out as inflation nestles into the housing market.
Is it better to buy a house during inflation or recession? ›During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.
Do house prices go down after inflation? ›House prices tend to rise as inflation increases. This isn't surprising: The price of most everything tends to rise when inflation is higher, and housing is no exception. The Federal Reserve Board will often try to slow inflation by increasing its benchmark interest rate.
Is it better to buy a house when interest rates are high? ›It's harder to qualify for a loan when interest rates are high, which means there will be fewer buyers competing for existing home inventory. Homes are staying on the market longer, which means you may be able to take more time to consider your choices and make a decision.
What will mortgage rates be in 2024? ›These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.
Why is raising interest rates bad? ›When Fed rate hikes make borrowing money more expensive, the cost of doing business rises for public (and private) companies. Over time, higher costs and less business could mean lower revenues and earnings for public firms, potentially impacting their growth rate and their stock values.
How does raising rates fight inflation? ›Rising interest rates can stave off inflation
As mentioned before, raising interest rates helps inflation by reducing consumer borrowing and spending, thereby cooling off demand for goods and services. This then helps lower prices and reduce inflation.
Does the Fed rate hike affect mortgages? ›
The Federal Reserve doesn't set mortgage rates, but its actions indirectly affect mortgage rates. As of its meeting of May 3, 2023, the Fed has raised a benchmark interest rate by a total of 500 basis points, or 5 percentage points, since the central bankers began raising interest rates in 2022.
How does increasing interest rates reduce inflation? ›How does raising interest rates lower inflation? Won't it make things worse? Higher interest rates mean people overall will spend less on goods and services in the shops and online. So, the economy slows down and companies can't put up their prices so quickly.
Will rate hikes affect my mortgage? ›The string of consistent interest rate increases prompted mortgage rates to rise steadily to pre-pandemic levels after hitting record-lows at the start of the pandemic—and rates kept rising. As it stands, mortgage rates are still significantly higher than they were during the same period in 2022.
What happens when rate hikes go up? ›If rates rise, it becomes more costly to borrow money. When the Fed boosts its lending rate, consumers and businesses can see increased costs for borrowing, which can discourage spending. Higher costs for credit mean you'll pay more for goods over time and can even discourage you from making certain purchases.
How does raising rates affect the market? ›Higher interest rates tend to make bonds more attractive. Historical observation has shown that stock prices and interest rates have an inverse correlation between interest rates and stock market, meaning as rates rise, share prices tend to move lower.