Can the housing market and broader economy cope with higher mortgage rates?

Louisa Sanghera | August 26, 2018

The RBA has kept the interest rates sitting at 1.5% since August 2016 – this is the longest period of cash rate stability on record. 

Investors who have been an increasing source of mortgage demand over recent years have been incurring higher mortgage rates since 2015 as lenders charge a premium for investment loans. 

Over the recent years, the mortgage lending environment and the rate escalation in dwelling values, particularly in Sydney and Melbourne, have been called out by the RBA as risks to the financial stability of the Australian economy. 

Higher mortgage rates to investors along with tightened overall credit conditions, higher supply levels and reduced housing affordability in the largest capital cities have been major contributors to the recent declines in dwelling values. Investor activity has reduced substantially as a result of these measures. 

Source: Mortgage Business, August 2018