With the latest inflation data coming in higher than expected, many homeowners have been left wondering whether the Reserve Bank of Australia (RBA) will hike the cash rate next month.
Even if the RBA doesn’t increase the cash rate, experts predict housing purchases will slow due to weakening economic conditions and affordability constraints.
With job vacancies dropping, employment growth slowing, and the unemployment rate lifting, mortgage serviceability may weaken, particularly if homeowners lose their jobs or work fewer hours.
Data from the Australian Bureau of Statistics shows that the household savings to income ratio fell from 1.6% to 0.9% in the March quarter. In other words, saving a deposit is becoming more difficult for many Australians.
If you’re looking to enter the market, chat with us about your finance options. We’ll explain what solutions are available to you.
Interest rate news
The monthly Consumer Price Index indicator jumped to 4 percent in the 12 months to May, up from 3.6 percent in April. The largest increases in prices were in housing, up 5.2%; food and non-alcoholic beverages, up 3.3%; transport, up 4.9%; and alcohol and tobacco, up 6.7%.
There’s now growing concern that with inflation on the rise, the RBA may increase the cash rate again when the board next meets on August 5-6.
The minutes from the RBA’s last meeting revealed the board was ready to raise rates if “inflation expectations” changed.
The discussion, held on June 17 and 18, showed that the board, led by RBA Governor Michele Bullock, was concerned about rising prices and the challenge of bringing inflation back to the target of 2-3 percent.
Talk of a cash rate cut has largely been put on ice, with some of the Big Four anticipating it will not happen until February or May 2025. Others are more optimistic it could still happen this year.
Meanwhile, mortgage arrears have been rising from their COVID lows of just 1.0% in the third quarter of 2022, reaching 1.6% in the March quarter of 2024.
Research released by ASIC’s Moneysmart found 47% of Australian adults with debt, or 5.8 million people, struggled to make repayments in the last 12 months. The top reasons included cost-of-living pressures, reduced income and unexpected expenses. Yet many people don’t ask for help.
If you fall into this category, please reach out. We’ll compare the market and see how your mortgage measures up against others.
Home value movements
Australia’s property values increased a further 0.7% in June, reaching a total growth of 8% across the financial year.
Perth continued to perform strongly in June, with home values increasing by 2%. Adelaide also saw strong growth, at 1.7%, while Brisbane’s property prices increased by 1.2%.
Prices were flatter in Canberra (0.3%), Hobart (0.2%), and Darwin (0%). Melbourne saw prices decrease by -0.2%.
CoreLogic’s research director Tim Lawless said the national index had found a groove, rising between 0.5% to 0.8% month on month since February.
“The persistent growth comes despite an array of downside risks, including high rates, cost of living pressures, affordability challenges and tight credit policy,” he said.
“The housing market resilience comes back to tight supply levels which are keeping upward pressure on values.”
| All dwellings | Auctions | Clearance Rate | Private Sale | Monthly home values change |
|---|---|---|---|---|
| VIC | 971 | 57% | 1332 | ▼ – 0.2% |
| NSW | 1076 | 54% | 1731 | ▲ 0.5% |
| ACT | 81 | 52% | 116 | ▲ 0.3% |
| QLD | 289 | 48% | 1162 | ▲ 1.2% |
| WA | 6 | 50% | 713 | ▲ 2.0% |
| NT | 2 | 50% | 16 | 0% |
| TAS | 2 | -% | 139 | ▲ 0.3% |
| SA | 139 | 76% | 365 | ▲ 1.7% |
* Australian auction results, clearance rates and recent sales for the week ending 30 June 2024
* The clearance rate is preliminary and current as of 4:30 pm, 3 July 2024
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