A third of Aussies support an interest rate hike by RBA if it stops property price surges.
Almost a third of Aussies have thrown their support behind an interest rate hike by the Reserve Bank if it pulls the handbrake on astronomical surges in property prices.
The last Canstar survey released Tuesday morning found 29 per cent of Australians were in favour of a rate rise to cool the property market with latest CoreLogic data showing national home values have jumped 21.6 per cent in the year to October.
CoreLogic found half the capitals notched annual growth over 20 per cent, with borrowers already having to contend with fixed rate hikes in the past month.
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The last time the RBA increased its cash rate target was 11 years ago on November 2, 2010, when it put in a 25 basis point hike to 4.75 per cent when the global economy was growing faster than trend and underlying inflation was running at about 2.5 per cent, according to a monetary policy statement by then RBA assistant governor Dr Philip Lowe.
The RBA is under pressure to bring forward increases to its cash rate target – from 2024 to 2022 – after latest Australian Bureau of Statistics figures showed trimmed median inflation hit 2.1 per cent in the September quarter – the highest level since 2015.
Canstar group executive financial services Steve Mickenbecker said that rise – based on lenders increasing fixed rates for terms greater than 12 months – was most like “some time in 2023”.
The RBA board meets today November 2 for its second last monetary policy meeting of 2021, with a decision on the path forward released at 2.30pm AEDT (1.30pm AEST Qld).
A fifth of those surveyed believed a better way to go would be to increase first homebuyer support.
Canstar data showed that while 27 lenders have already moved to increase 343 fixed rates by an average of 0.17 per cent in October ahead of any decision by the RBA. The average variable interest rate for owner occupiers was 3.1 per cent right now, it found, with the average variable interest rate for investors at 3.45 per cent.
Just over a fifth of those Aussies surveyed (22 per cent) believed the property market needs cooling but did not think interest rate hikes were the best way to do that, with over a third (36 per cent) saying there should instead be additional support for first home buyers, 33 per cent wanting tougher restrictions on investors and 30 per cent calling for way to make longer tenancy leases more attractive.
Canstar analysis found a 0.25 per cent hike passed on in full by lenders would see add $137 a month to mortgage repayments for someone currently sitting on 3.09 per cent variable rate with a million dollars owing. For someone owing half that ($500,000) it would add $68 a month costing to $2,206.
“But,” Mr Mickenbecker warned, “this will be just the start of the race for rate increases, and a year down the track would surely see the cash rate increase by 1.00 per cent. If this happens, the borrower with a $1 million mortgage would see their monthly repayments rise by $561 to $4,826, which is quite a stretch.”
“Just over half of Australian adults believe the property market needs cooling, but it may be a case of “be careful what you wish for” for the almost one in three Australians who would welcome interest rate increases, as the pursuant mortgage stress would be quite a drag on the economy beyond housing prices.”
Canstar currently lists 195 loans below 2 per cent, with Mr Mickenbecker saying those on an average rate of 3.09 per cent were “paying way too much already”.
“The time to start interest rate proofing yourself is now, when rates are low.”
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