With the RBA expected to raise its cash rate for a fourth time this year, experts warn additional hikes would be 'devastating' for the property market while keeping housing more unaffordable than ever.
Key facts
- The RBA is widely expected to lift its cash rate to 4.6%, from 4.35%, on Tuesday afternoon.
- The increase would add about $100 to the monthly mortgage interest bill on a $700,000 loan.
- It would be the fourth rate rise this year, according to the Guardian.
- Experts say a fifth or sixth rise would be 'overkill'.
- Higher borrowing costs are expected to outweigh any fall in prices, keeping housing unaffordable.
Two or even three more Reserve Bank of Australia interest rate hikes would be “devastating” for the property market but would still leave housing more unaffordable than ever, as higher borrowing costs outweigh lower prices, experts have warned, according to the Guardian.
The RBA’s monetary policy board is widely expected to announce an increase in its cash rate to 4.6%, from 4.35%, on Tuesday afternoon. The Guardian reports the decision would add another $100 to the monthly mortgage interest bill on a $700,000 loan.
The expected move would mark the fourth rate rise this year. Experts told the Guardian that a fifth or even sixth increase would amount to “overkill”.
The central tension identified by the experts is that even if higher rates push property prices down, the increased cost of borrowing would more than cancel out the benefit for prospective buyers. That dynamic means affordability could worsen rather than improve despite falling prices.
The warning highlights the difficult balance facing policymakers, who are weighing the impact of tighter monetary policy on households already carrying large mortgages against broader economic goals.
Why it matters
Interest rate decisions directly affect the monthly costs faced by millions of mortgage holders and shape whether housing becomes more or less affordable. Experts warn that continued hikes could hit the property market hard without delivering the affordability relief buyers are hoping for.
Frequently asked questions
How much is the RBA expected to raise the cash rate?
The RBA is widely expected to lift its cash rate to 4.6%, from 4.35%, according to the Guardian.
How would the rate rise affect mortgage repayments?
The Guardian reports the increase would add about $100 to the monthly mortgage interest bill on a $700,000 loan.
Why do experts warn about further hikes?
Experts told the Guardian that two or three more hikes would be 'devastating' for the property market while still leaving housing more unaffordable, as higher borrowing costs outweigh lower prices.