Commonwealth Bank economists expect larger falls in house prices due to this week’s interest rate rise, forecasting peak-to-trough declines in dwelling prices of 18 per cent in Melbourne and Sydney over this year and next
Commonwealth Bank economists expect larger falls in house prices due to this week’s interest rate rise, forecasting peak-to-trough declines in dwelling prices of 18 per cent in Sydney and Melbourne over this year and next.the banking giant’s economists said there had been a “clear shift in tone and stance” from the central bank, and they now expected a more “aggressive” cycle of rate rises.
In previous forecasts from March, CBA’s economics team had tipped a more mild 3 per cent decline over this year and a 9 per cent fall next year in both Sydney and Melbourne. The updated forecast comes amid investor fears that a quicker series of rate rises could mean more mortgage borrowers find themselves in financial pain, causing bank shares to plunge since Tuesday. The slide continued on Thursday, as CBA shares fell another 2.6 per cent, Westpac fell 3.7 per cent, and ANZ Bank National Australia Bank both fell 2.3 per cent
CBA had previously thought the cash rate would settle at 1.6 per cent next year, but it now believes the RBA will raise rates to the “contractionary” level of 2.1 per cent by the end of this year.
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