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 are predicting housing purchases to slow in line with weakening economic conditions and affordability constraints.
With job vacancies dropping, employment growth slowing and the unemployment rate lifting, we may see mortgage serviceability weaken, particularly if homeowners lose their jobs or work fewer hours.
Data from the Australian Bureau of Statistics shows the household savings to income ratio fell from 1.6% to 0.9% in the March quarter. In other words, saving a deposit is getting harder for many Australians.
If you’re looking to get into the market, chat to us about your finance options. We’ll talk you through what solutions are available to you.
Interest rate news
The monthly Consumer Price Index indicator jumped to 4 per cent in the 12 months to May, up from 3.6 per cent in April. The largest increase in prices was across housing, up 5.2%; food and non-alcoholic beverages, which rose 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 the board, led by RBA Governor Michele Bullock, was concerned about rising prices and the challenge to bring inflation back to the target of 2-3 per cent.
Talk of a cash rate cut has largely been put on ice, with some of the Big Four anticipating there won’t be a cash rate cut 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 upwards 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% |
* Monthly Home Values figures as of 30 June 2024
* 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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