Home loan interest rates could rise despite falling house prices
Reporter: Lucia Fisher. Australian first home buyers could face a new affordability squeeze, with property prices falling but the cost of borrowing potentially rising.
House prices declined across every capital city in the September quarter for the first time in 15 years, according to Domain’s latest house price report.
While cheaper properties could help Australians trying to enter the housing market, higher interest rates could offset those savings by increasing mortgage repayments.
The prospect of another rate rise follows comments by Reserve Bank of Australia Deputy Governor Andrew Hauser, who warned the central bank faces “hard choices” at the Citi Australia & New Zealand Investment Conference earlier this week.
Swinburne University economics expert Dr Sarod Khandaker said falling property prices did not necessarily make homes more affordable.
“While property prices have fallen, increased borrowing costs mean first home buyers may be no better off financially,” he said.
“For buyers, the price of a property is only part of the cost of home ownership. Higher interest rates mean larger monthly mortgage repayments and can also reduce the amount banks are willing to lend.”
For first home buyers, falling property prices may mean a smaller deposit, but the cost of paying off a mortgage remains a significant barrier.
The affordability question is therefore not simply how much a home costs, but how much it costs to borrow the money to buy one.
Comments