Another month, another cash rate rise

Another month, another increase in the cash rate. A few lenders raised their variable rates by 0.5 percentage points after the Reserve Bank of Australia (RBA) raised the cash rate to a six-year high of 1.85 percent in August.

During this time, housing values nationwide are declining at their quickest rate since the global financial crisis of 2008. (GFC). Tim Lawless, director of research at CoreLogic, recently claimed that, particularly in major cities like Sydney and Melbourne, the market has shifted in favour of buyers rather than sellers.

Speak to us about getting your finances pre-approved if you’re thinking about buying a house in the spring.

Interest rate news

The RBA increased the cash rate by an additional 50 basis points to 1.85 percent during its meeting in August.

The RBA has raised the cash rate four consecutive months, marking the fastest tightening effort in nearly 30 years to combat inflation. This is also the first time since the implementation of inflation objectives in 1990.

The hike will mean a $140 monthly increase for the typical borrower with a $500,000 debt and 25 years left to pay it off, or $472 since the RBA started raising rates in May 2022.

The cash rate is anticipated to rise again. Recently, Treasurer Jim Chalmers stated that the RBA’s target range of 2 to 3% would not be reached until 2024, with customer price inflation expected to peak at 7.75% by December.

If you’re finding it difficult to make your mortgage payments due to recent interest rate increases, we are here to help.

Home value movements

According to the most recent CoreLogic data, Australian home prices are dropping at their quickest rate since the 2008 financial crisis. Since the beginning of May, the median home price throughout the country has decreased by 2% to $747,182.

Australian home values decreased by -1.3% in July, with monthly declines reported in five of the eight major cities. According to Mr. Lawless, the state of the housing market is anticipated to deteriorate as interest rates rise through the end of 2022.

However, it is abundantly evident that markets have fallen fairly quickly after the first rate rise on May 5, he added. “The rate of growth in home values was falling well before interest rates started to rise,” he said.

“Although the housing market has only been in a downturn for three months, the rate of decrease is equal to the GFC’s start in 2008 and the early 1980s’ severe downturn.

The collapse has been notably hastened in Sydney, where we are witnessing the sharpest value declines in almost 40 years.

Regional markets have also softened.