However, the peak body warns about the long-term impacts of ballooning interest rates
Most Queensland mortgage holders will be able to “begrudgingly” endure the Reserve Bank’s latest rate hike by the Reserve Bank, according to the Real Estate Institute of Queensland.
As anticipated by major banks, the cash rate has been raised by 0.25 basis points to 4.35%. This marks the 13th rate hike in the current cycle for the RBA, the first increase since June of this year, and the highest level since November 2011.
REIQ Chief Operating Officer Dean Milton said that households with mortgages have largely adjusted their budgets to accommodate the sharpest rise in interest rates witnessed in a generation.
“While we’ve reached the 13th rate hike this cycle, there has been no material uptick in distressed loans, and most mortgagees have managed to grin and bear it,” Milton said. “This is a positive indication that existing mortgage holders have shown preparedness and a level of resilience to rising interest rates.”
However, Milton said warning signs were emerging regarding the medium to long-term impact of rising interest rates. The decline in first home buyer activity and the collapse of building approvals are concerning, he said.
“This means that the dream of home ownership may be slipping further out of reach with every cash rate rise, and new housing supply is struggling to get off the ground,” Milton said. “First-home buyer activity was down 16% in the 12 months to April and there appears to be no desire from the Queensland state government to arrest this trend.”
Building approvals in Queensland are also falling short of the demand, with only 33,755 new dwellings approved across the state, well below the 40,000 or more per annum needed to meet the demands of the South East Queensland region, as stated by the Housing Industry Association (HIA).
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“This dismal approval rate matches that of the 1980s, when there was practically half of today’s population to cater for,” Milton said. “Further, loans for construction of new builds are at record lows in Queensland signalling a kink in the pipeline of future new housing supply. In that respect, rising interest rates certainly do no favours for helping bolster our home ownership rates and helping bridge the gap between the sheer demand for housing and the shortage of supply – both things which would go a long way towards easing the housing crisis.”
Milton also highlighted that the burden of rising interest rates is being borne primarily by young lenders and those with lower incomes.
“Spending is being driven by 55+ Australians, who are a cohort that is largely mortgage-free and less likely to be negatively impacted by increases to interest rates – on the contrary, their savings are boosted by it,” Mr Milton said. “Inflation is also linked to the large increases in electricity, government infrastructure spend, and fuel prices, which are not influenced by interest rate movements.”
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