Anxious home buyers preparing for rate rises

More Australians are gearing up for future rate hikes with new survey data pointing towards lower levels of public optimism

Anxious home buyers preparing for rate rises



Greater numbers of home buyers are preparing for mortgage rates to increase over the next 12 months with 61% believing that rate hikes are imminent.

These figures come from the latest bi-annual HomeStart Finance Index which measured home buyer sentiment amongst more than 200 people.

The research also found that home buyers are now less optimistic about the chances of rates decreasing with only 11% predicting rates to drop. This is lower than the 17% polled a year ago.

Deborah Dickson, HomeStart finance head of retail, said that home buyers clearly believe the recent commentary that rate hikes are imminent.

“Many experts are predicting rate hikes for the nation’s official cash rate, with one saying we could see eight rate increases in the next two years. Any change in the official cash rate will most likely result in banks raising their home loan interest rates,” she said.

“The cash rate has remained at an extremely low level for a long period now – just 1.5% since August 2016. The results show that some Australians believe it’s only a matter of time before rates return to a more normal level due to a more positive economy.”

The survey results could also be due to public sentiment around the Federal Budget’s bank levy which many believe will be passed onto mortgage holders, she said.

Even a 0.25% increase on a $300k home loan would add $50 a month in repayments – an amount which will be enough to push some families financially.

“A survey by Digital Finance Analytics of 26,000 households showed that 20% would find themselves in mortgage difficulty if interest rates rose by 0.5% or less, while half would find themselves under financial pressure if home loan interest rates increased from today’s average of 4.5% to a long term average of 7%,” she said.

“Historically low interest rates have made buying property extremely attractive in recent years, however, home owners now need to start thinking about an environment where there are higher interest rates and the strategies they can put in place to ensure they can meet their increased repayments.”

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