Lending Association

Signs of strength in the housing market despite uncertainty around interest rates.

The Reserve Bank of Australia’s (RBA) decision to pause interest rate hikes following ten consecutive increases has left many wondering whether we have hit the peak of the rate hiking cycle. This decision allows more time to assess the impact of previous hikes and the overall economic outlook. This is a good time to make informed decisions about buying or selling property and take stock of your expenditure.

There are signs of strength in the housing market, with recent home price increases (in Sydney and Melbourne) and low unemployment rates. While uncertainty remains about whether interest rates will hold steady in May and beyond, there is a view that the overall economic outlook will continue to improve and restore confidence in the housing market.

Have we hit the peak of rate rises?

Following ten consecutive rate increases, the RBA has decided to put a pause on interest rates, allowing more time to assess the impact of previous hikes and the overall economic outlook.

Tim Lawless, research director at CoreLogic, stated “It’s looking more likely that we are either at or approaching the peak of the rate hiking cycle, which is likely to instil some renewed confidence in decision-making such as buying or selling a home.”

An increase in certainty around the rate cycle could lead to improvements in consumer sentiment, which has been declining due to the pandemic and other economic factors. While the Board acknowledges that some tightening may still be necessary to achieve their inflation targets, the pause in rate hikes will provide time to assess the state of the economy. Low unemployment rates and recent home price increases are showing signs of strength, but there is still progress to be made in hitting the inflation target of 2-3%.

Restoring confidence in the housing market.

It’s no secret that interest rates significantly impact the property market, affecting borrowing capacity, affordability, and consumer sentiment.  

However, the recent decision by the RBA to pause interest rate increases could bring positive news for those in the market. As consumer sentiment improves, we could see more buyers and sellers returning to the market, resulting in an upward trend in housing market activity. In fact, figures from CoreLogic showed home values across the nation rose for the first time in almost a year in March, up 0.6% from February.  

This is a promising sign, and while it’s unclear whether March marks a turning point for housing values, low advertised supply, tight rental conditions, and surging overseas migration are providing positive momentum to housing markets.  

The performance of housing values is an important trend to watch as it’s a significant contributor to household wealth. If wealth effects from higher housing values trigger more consumer spending, this may have an impact on the trajectory of interest rates. While house prices in some capitals may still have a way to go, economist Craig Emerson predicts that nationally house prices have bottomed, thanks to immigration into Sydney and Melbourne. Despite previous trends showing that house prices fall during periods of rising interest rates, this pause in rate hikes could moderate inflation and bring a recovery in house prices. 

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If you are currently thinking of buying or selling, this is a crucial time to review your options and make informed decisions. This pause in rate hikes is an excellent opportunity to re-examine your current financial plan and make any necessary adjustments, taking into account the impact of rate rises on your budget. Our team of professionals can look at your savings and help you consider whether there are any changes you can make to maximise your financial position in the current market.

Source: CoreLogic


Any information provided herein is of a general nature only. No consideration has been taken into your objectives, needs or financial situation. Before acting on this information you should consider if it is appropriate for your situation.