Mortgage holders have been delivered something of an unexpected reprieve, with the Reserve Bank of Australia defying almost all expectations to deliver a much smaller than anticipated rate hike.
At its monthly board meeting today, the Reserve Bank of Australia lifted the cash rate by 25 basis points to 2.6%.
While that still takes it to the highest level since 2013, most economists were bracing for another supersized increase of a half a percent.
PropTrack senior economist Eleanor Creagh said it’s now clear the RBA is taking its foot off the accelerator.
“We got a hint that the board may soon adjust the pace of tightening when there was a shift in the language used in the minutes from the August meeting,” Ms Creagh said.
While much smaller than anticipated, the rate hike puts some further strain on household budgets and comes on top of broader sustained cost-of-living pressures.
And Ms Creagh said there will inevitably be a further impact felt in property markets.
Home prices nationally are now 3.4% down from their March peak as of September – declines driven largely by the RBA’s aggressive rates-driven response to inflation
“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 5% from peak and below levels recorded in September last year,” Ms Creagh said.
“Today’s rate hike will further increase borrowing costs and reduce maximum borrowing capacities, pushing property prices further down.
“And in the period ahead, the level of interest rates will be a key determinant of housing market conditions and the pace and depth of home price falls.”
However, the latest, Home Price index report released on Saturday, shows the pace of property price falls in September had slowed “significantly”.
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