Home values drop as interest rates, costs of living squeeze buyers | rachelclun
Home values fell nationally for the second month in a row, driven by declines in Sydney and Melbourne, and are expected to fall further as interest rates rise, reducing buyers’ borrowing power and stifling consumer spending.
“It was actually back in March of last year that the rate of growth peaked. And since then, we’ve been seeing housing value growth losing steam,” he said.Since March 2021, consumer confidence had fallen and banks had begun raising their fix-rate mortgage interest rates, Lawless said. More recently, the price of everyday essentials including food and fuel has risen, further squeezing consumers.
Lenders have responded by lifting mortgage rates, and Commonwealth Bank on Thursday unveiled a 1.4 percentage point increase to all its fixed-rate home loans.“The bank is responding to the rising cost of fixed-rate funding and a market that refuses to believe the RBA will stop hiking the cash rate at around 2.5 per cent,” she said.
The bank’s economists now expect “a larger peak-to-trough fall” in home values as the RBA moves more swiftly, with Sydney and Melbourne leading the declines. They forecast capital city dwelling prices to fall by 3.7 per cent by the end of 2022 and a further 14 per cent in 2023.
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