May Newsletter

This month, the Reserve Bank of Australia (RBA) increased the official cash rate for the first time in more than 11 years. The move is likely to have huge implications for the housing industry.

For one, lenders have already been passing on the cash rate hike to variable mortgage holders. 

There could also be other flow-on effects for homeowners from the cash rate increase, including further downwards pressure on housing growth rates, which were already losing momentum.

On the one hand, this could be good news for aspiring homeowners, as property prices may come down. But as CoreLogic research director Tim Lawless put it, a higher cash rate also implies higher variable mortgage rates, a reduction in borrowing capacity and tighter serviceability assessments for prospective borrowers. 

Interest rate news

At its May meeting, the RBA raised the official cash rate by 25 basis points to 0.35 per cent. 

The last time the RBA increased interest rates was in November 2010 and the official cash rate has been at a record low of 0.1 per cent since November 2020. 

Some lenders have already begun passing on the rate increase in full, and further rises are expected.  

Reserve Bank governor Philip Lowe said the Board was committed to doing what was necessary to ensure that inflation in Australia returned to target over time. “This will require a further lift in interest rates over the period ahead,” he said.  

Lowe indicated it was not unreasonable for the cash rate to climb to 2.5 per cent

Home value movements

National housing values increased 0.6% in April. Values were down -0.2% in Sydney, while in Melbourne, growth was flat. Hobart recorded a negative monthly change of -0.3%, its first monthly fall in 22 months.  

CoreLogic’s Research Director Tim Lawless said the weakening state of the market had taken the rolling quarterly trend into negative territory across Sydney and Melbourne for the first time since the cities were in extended lockdowns in mid-to-late 2020. 

However, elsewhere, housing conditions proved more buoyant.  Half of the capitals still recorded a monthly growth rate above 1%. 

With 1.9% growth in April, Adelaide led the pace of capital gains, followed by Brisbane (1.7%), Canberra (1.3%) and Perth (1.1%). 

Meanwhile, regional Australia housing values were up 1.4% in April. 

All dwellingsAuctionsClearance RatePrivate SaleMonthly home
values change
VIC75085%1266– 0.0%
NSW53185%1294▼ -0.2%
ACT9378%66▲ 1.3%
QLD13563%1270▼ 1.7%
WA2100%757▲ 1.1%
NT333%27▲ 0.9%
TAS0– %187▼ -0.3%
SA9093%387▲ 1.9%

* Monthly Home Values figures as of 30 April 2022
* Australian auction results, clearance rates and recent sales for the week ending 1 May 2022
* The clearance rate is preliminary and current as of 12.36am AEST, 4 May 2022

With this month’s cash rate rise and experts expecting more increases on the horizon, now is the time to review your home loan. 

We’ll explain whether your lender is passing on the cash rate increase and how this will impact your repayments. It may be financially worthwhile to change lenders, so speak to us to find out what offers are available. 

Additional sources

CoreLogic RP Data Daily Home Value Index: Monthly Values


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