In the wake of the RBA's rate move, peak body says banks and borrowers are well-prepared
The Real Estate Institute of Australia is urging calm in the wake of the Reserve Bank’s cash-rate hike to 0.35%.
The RBA raised the cash rate from its historic low on Tuesday. REIA President Hayden Groves said the increase would have modest impacts on affordability, with both banks and borrowers well-prepared.
“Wages are expected to increase, offsetting a rise in home-loan repayments where they are passed on by banks, and market indications are that housing prices will continue to stabilise,” Groves said. “Aspiring home buyers will not be facing the extreme growth experienced since the onset of the COVID-19 pandemic, so there is no need for those hunting for a home to put those plans on hold.”
This rate hike was the first since November 2010, but REIA said it felt banks and borrowers were prepared to deal with a higher-interest-rate environment.
“If the cash rate rises to the 2.1% forecast, then the proportion of median income required will rise by 6.2%, which most financial institutions would have already stress-tested applicants for such rises,” Groves said. “That being said, with market economists forecasting a cash rate of at least 2.0% by mid next year, if wages don’t increase it could be a completely different scenario, which will see affordability at its worst in more than a decade.”
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REIA said the cash-rate hike highlights an urgent need for a national plan to address housing affordability and supply.
“While we support current government policies being presented during the election campaign and previous plans from the current government, prohibitive taxes such as the extremely high stamp duty payments are a key concern in limiting supply and affordability,” Groves said.
