(Australian Associated Press)
Home loan interest rates are expected to continue to rise despite the central bank keeping the official cash rate on hold, some economists say.
The Reserve Bank of Australia on Tuesday held the official interest rate steady at a record low 1.5 per cent, where it has been since August 2016.
Property analytics firm CoreLogic head of research Tim Lawless said homeowners aren’t off the hook, as banks are likely to hike rates independently.
While the cash rate has remained on hold, mortgage rates have been climbing since September 2016.
“Arguably, higher mortgage rates have done much of the heavy lifting in slowing down home value appreciation and cooling investment demand,” Mr Lawless said.
“There is an expectation that mortgage rates will continue to rise, despite a steady cash rate setting, as lenders adjust their credit policies to accommodate the latest round of APRA mandates.”
The Australian Prudential Regulation Authority (APRA) in March directed banks to cap interest-only loans at 30 per cent of new residential mortgages, which prompted a round of rate increases by the major lenders.
Recent figures suggest the property market may be losing steam, with the CoreLogic Home Value Index showing capital city home prices rose by just 0.8 per cent in the June quarter, the lowest quarterly growth rate since December 2015.
In a further sign of a slowing market, building approvals for new homes fell 5.6 per cent in May, the second drop in three months, according to the Australian Bureau of Statistics.
ANZ senior economist Daniel Gradwell said he expected further falls in residential building approvals and a dampening of the property market throughout 2017.
Meanwhile, home values in Sydney, Melbourne, Brisbane and Perth all rose in the week to Sunday, but Adelaide recorded a 0.2 per cent dip, according to CoreLogic figures.
Auction clearance rates have been trending lower since peaking at 78.4 per cent in February, with the latest rate at 70.3 per cent.
CAPITAL CITY PRIVATE TREATY MEDIAN PRICES
Sydney – $995,000
Melbourne – $715,549
Canberra – $626,000
Darwin – $541,000
Brisbane – $515,250
Perth – $505,000
Adelaide – $435,000
Hobart – $370,000
Combined capitals – $700,526
Sydney – $737,500
Melbourne – $537,200
Darwin – $472,500
Perth – $415,000
Canberra – $409,000
Brisbane – $380,000
Adelaide – $323,000
Hobart – $286,500
Combined capitals – $582,464
Source: CoreLogic Property Market Indicator Summary week ending July 2, 2017.