Brighter And some

Have we reached a rate hike tipping point?

by Kate Watt, Marketing Manager 22 June 2023

Aussie mortgage holders have this month been hit with a 12th interest rate hike as the Reserve Bank of Australia continues to do battle with the formidable foe of stubbornly high inflation.

While many were predicting a property price plunge while the RBA rate rise party continued, we’ve actually seen a surprise uptick in property values.

That’s a double-edged sword for mortgage holders because the RBA has warned further rate rises can be expected while inflation and property price growth remain high.

But how many more rate rises can Aussie mortgage holders absorb?

SQM Research says the level of ‘distressed sales’ from sellers unable to make ends meet remains very low, however the June rate hike pushes us closer to a tipping point.

“That is because buyers who borrowed in recent years were stress-tested on their ability to repay their loans if rates rose by 2.5 or 3 percentage points,” reports Domain. “The cash rate has already climbed 4 percentage points, and further hikes could lay ahead.”

While some increase in distressed sales may occur the extent of the impact could be mitigated so long as homeowners can remain in their jobs.

“Most lenders can deal with stress if the borrower is still employed,” Westpac senior economist Matthew Hassan told Domain.

PEXA chief economist Julie Toth also told Domain she didn’t believe distressed sales would feature strongly in the property market this year with many Aussies taking on extra work or moving to better paid jobs in response to higher rates.

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