Financial analysts have predicted a A$90 increase in monthly mortgage payments in Australia when the country’s big banks lift their base interest rates. The increase in mortgage rates could be around 0.45 percentage points when the Reserve Bank of Australia (RBA) raises the cash rate by 0.25 percentage points.
With the rate increase, borrowers would likely add A$90 on their monthly repayments for an A$300,000 loan.
Banks in Australia have to pass on their rising costs to customers via the rate increases, a move that is necessary to enable banks to continue to compete for credit in the global market.
The mortgage rate increases are expected to boost the local dollar, but it has alarmed nearly 20,000 first-time home buyers in Queensland. The Urban Development Institute of Australia recently classified the state as substantially not affordable such that another interest rate hike could keep new home buyers on rentals.
Dan Molloy, managing director at REIQ, said that “over the past two years, Queensland’s median house prices have jumped up and down depending on the types of buyers in the market at the time.”
He noted that the number of first-time home buyers was higher than the 2009 level, “so correspondingly the median went down given that they bought cheaper properties. This year, there has been a return to a more even distribution of first and non-first home buyers in the market so the medians have increased accordingly.”
He added that the change in buyers, as well as the types of properties on sale “has unfortunately given the false impression there has been robust property price growth when prices are now really where they were two years ago.”