Real Estate Investment:Today

These will create a ‘double whammy’ for households

Higher costs for essentials and higher interest rates will be a ‘double whammy’ for households

As universally expected, the RBA made the decision to raise the cash rate at their June meeting, however, the 50 basis point hike was larger than expected.

The latest move takes the overnight cash rate to 0.85%.

Interest rates consistently rise

With underlying inflation moving sharply higher to be up 3.5% over the year, the RBA’s heavy lifting on the cash rate still has some way to go, with interest rates likely to consistently rise through the second half of the year and into 2023.

With the cash rate up, it’s highly likely variable mortgage rates will rise by the same or a similar amount over the coming week, taking the average variable interest rate for a new owner-occupier loan to around 3.16%.

Together with the 25 basis point increase handed down last month, the cumulative 75 basis point lift in mortgage rates will add approximately $200 per month in additional repayments on a $500,000 mortgage compared with mortgage rates in April.

Mortgage Rates Dynamics

While higher interest rates will lower borrowing capacity, fewer household savings and tighter balance sheets will also weigh on serviceability assessments for prospective borrowers, adding to diminished demand for home purchases.

Settled sales estimates from CoreLogic indicate dwelling sales over the three months to the end of May were -19% lower than at the same time a year ago.

Monthly Volume Of Dwelling Sales National 01 June

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