Reserve Bank of Australia leaves interest rates on hold for April 2021, borrowers expect early hike

Why a time bomb is spinning for a million home borrowers despite promises that interest rates will stay the same until 2024

  • Reserve Bank of Australia again suspended interest rates at 0.1%
  • Gov. Philip Lowe said RBA would monitor ‘rising house prices’
  • Canstar survey shows Australians expect interest rates to rise before 2024
  • Over a million home borrowers have never faced rising interest rates

Historically low interest rates are a time bomb for a million home borrowers, as mortgage costs will rise well before 2024.

The Reserve Bank of Australia left the cash rate on hold at an all-time high of 0.1% on Tuesday, but Governor Philip Lowe acknowledged the rapid rise in house prices was a concern.

“Given the environment of rising house prices and low interest rates, the bank will carefully monitor trends in mortgage lending and it is important that lending standards are maintained,” he said. declared.

Since the end of last year, the RBA has repeatedly promised to leave them there until at least 2024, with the aim of reducing unemployment and pushing up inflation.

Record interest rates are a time bomb for a million home borrowers, as mortgage costs rise well before 2024. Pictured is an auction in Sydney

House prices are rising everywhere

Sydney: Up 4.3% to $ 1,112,671

Melbourne: Up 2.6% to $ 859,097

Brisbane: Up 2.6% to $ 607,969

Adelaide: Up 1.6% to $ 518,692

Perth: Up 1.8% to $ 527,833

Hobart: Up 3% to $ 584,974

Darwin: Up 1.9% to $ 519,575

Canberra: Up 3.3% to $ 819,707

Source: CoreLogic Home Value Index for March 2021 on Median Home Prices

The Reserve Bank has not raised interest rates since November 2010, over ten years ago.

During that time, 1,005,661 first-time homebuyers bought a house or apartment to live in, RateCity calculated.

RateCity research director Sally Tindall said fixed-rate borrowers were particularly at risk three years from now.

“It’s amazing to think that there are over a million homeowners who have never experienced a cash rate hike,” she said.

“ The problem is that some people who are fighting tooth and nail to enter the real estate market today have not thought about whether they can honor the repayments in three or four years, ” he said. she declared.

“Fixed loans in a rising interest rate market can be a great tool to help people budget – until the music stops.

House prices may fall again, even without a rate hike, with a bank regulator crackdown on investor and interest loans only in 2017, causing a two-year real estate slowdown.

Three of Australia’s big four banks offer fixed mortgage rates below 2%.

Even though the Reserve Bank kept its promises to leave rates on hold for three years, 40% of adults polled by financial comparison group Canstar expected lenders to raise mortgage rates before 2024.

The Reserve Bank of Australia left the cash rate on hold at a record 0.1% on Tuesday, but Governor Philip Lowe acknowledged the rapid rise in house prices was a concern

The Reserve Bank of Australia left the cash rate on hold at a record 0.1% on Tuesday, but Governor Philip Lowe acknowledged the rapid rise in house prices was a concern

A third of respondents expected the Reserve Bank to hike rates before 2024 to slow runaway property price growth, with CoreLogic data from March showing home prices in Australia had jumped at the monthly rate on faster since October 1988.

Steve Mickenbecker, group director of financial services at Canstar, said the Reserve Bank or the Australian Prudential Regulation Authority, the banking regulator, should act sooner to stop a possible house price bubble.

“The pressure will start to rely on the Reserve Bank and financial regulators to step in if we don’t see the real estate market starting to slow down in the coming months,” he said.

The Canstar poll of 980 people found Australians optimistic about the economic recovery from Covid, with 42% predicting sufficient growth by 2024.

Nearly half of Australia expect interest rates to rise before 2024 to stop a house price bubble, a survey shows.  Pictured is a house in Glenelg in Adelaide

Nearly half of Australia expect interest rates to rise before 2024 to stop a house price bubble, a survey shows. Pictured is a house in Glenelg in Adelaide

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