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Economist Saul Eslake predicts Australia’s interest rate growth will slow

Economist Saul Eslake predicts Australia's interest rate growth will slow

There is a glimmer of hope for Australians fearing more interest rate pain, with a leading economist predicting the massive hikes could soon start to ease.

On August 2, the Reserve Bank of Australia raised interest rates for a fourth consecutive month, bringing them to a six-year high of 1.85 per cent.

It was also the third month in a row the cash rate rose by 0.5 per cent, the fastest interest rate growth Australia has experienced in almost 30 years.

The RBA has made it clear interest rates will continue to go up as it attempts to bring soaring inflation levels down.

But independent economist Saul Eslake, former Bank of America Merrill Lynch chief economist (Australia and New Zealand), believes interest rates will not rise as high as some are predicting.

“I think the Reserve Bank is of a mind to get it (interest rates) up to about 2.5 per cent by the end of the year. That could be either 2.35 per cent or 2.6 per cent,” he told NCA NewsWire.

“Then they will be able to pause to assess the impact of what they by then will have done.

“In my view, that may well be enough to slow the economy sufficiently.”

Mr Eslake said raising the cash rate to 2.35 or 2.6 per cent should be enough to achieve the RBA’s goal of slowing down the growth of domestic spending to counter inflation.

“As customers do have to start paying for the rate increases that have been announced, you should see spending slow quite a bit,” he said.

“The other part of the answer is that there is now starting to be some evidence to suggest that the global sources of inflationary pressure have peaked.”

Mr Eslake’s projection goes against what the country’s big four banks have previously predicted after they all unanimously forecast more pain for Australians.

NAB expected the cash rate to sit at 2.85 per cent by November, while Westpac forecasted it would rise to 3.35 per cent by February next year.

But Westpac’s forecast was not as dire as ANZ’s, who expected the cash rate to rise above three per cent before the Christmas holidays.

“Our expectation is that the RBA will deliver this via four more successive 50 basis point rate hikes in August, September, October and November,” ANZ’s head of Australian economics, David Plank, wrote in July.

“This 200 basis points of additional tightening sees the cash rate target at 3.35 per cent by November.”

The CBA forecasted the cash rate will sit at 2.60 percentage points by November.

Mr Eslake acknowledged and did not dismiss these projections, but expressed concern over what it could mean for the Australian economy.

“My view would be that if the Reserve Bank does end up going straight to 3 per cent or 3.5 per cent… there will be a much greater risk of a sharper slowdown in the Australian economy,” he said.

RBA Governor Philip Lowe has previously said he expects they will take further action on interest rates, but indicated those changes are not “pre-set” and subject to incoming data at the time.

“The Board expects to take further steps in the process of normalizing monetary conditions over the months ahead, but it is not on a pre-set path,” he said in a statement following the August hike.

“The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labor market.”

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CBA boss warns of ‘short sharp contraction’ headed for Australian economy

CBA boss warns of 'short sharp contraction' headed for Australian economy

The boss of Australia’s largest bank has warned that the economy is already declining and that a “short, sharp contraction” is on the way.

Late on Wednesday, the chief executive of the Commonwealth Bank of Australia, Matt Comyn, delivered the company’s annual results.

Although the CBA made an eye-watering $9.6 billion in profit over the last financial year, Mr Comyn warned that tougher times were on the horizon.

He told the Australian Financial Review that he predicted “a short, sharp contraction in the Australian economy.”

“We are definitely expecting a more challenging year ahead than we have seen in the last 12 months,” he added.

However, in some good news, the banking CEO believes a contraction is almost a certainty but a full-blown recession is less likely.

Australia is in the throes of an economic crisis as inflation rose to 6.1 per cent last month, the highest level it’s been for 20 years.

And for the first time in more than a decade, Australia’s central bank has had no choice but to increase the cash rate in a bid to stop rampant inflation.

For the last four consecutive months, the Reserve Bank of Australia has increased interest rates by 1.75 percentage points and Mr Comyn more rate increases will come.

Mr Comyn told the publication his bank predicts the cash rate to increase by another 75 basis points to sit at 2.6 per cent.

The cash rate is currently 1.85 per cent.

Once the cash rate hits 2.6 per cent, Mr Comyn said the economy would experience a contraction of 1.5 per cent.

He said he “hoped” that once the cash rate reached this point it would be enough to curb spending, adding “We need to see a slowdown in demand.”

Speaking to the ABC, Mr Comyn said “We do forecast recessions in the US, UK and Europe. We don’t believe that that’s the likely outcome in Australia.”

Already there are signs that Australians are splashing their cash less.

Mr Comyn said their customer data shows that spending is falling for both debit and credit cards.

This was significantly more for customers who had mortgages.

“It’s quite early post the immediate rate rises, [but] we are already seeing a downturn in spending across our customer base, both from a debt and credit perspective,” he said.

“Of course, that’s more pronounced with customers who have a home loan, and we expect that it will continue throughout the course of the calendar year.”

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Suburbs struggling the most amid RBA’s interest rate hikes revealed

Suburbs struggling the most amid RBA's interest rate hikes revealed

An estimated one in five mortgage holders – or 551,000 Australians – will struggle to pay back their mortgage if interest rates continue to rise as expected.

Comparison site Finder found a whopping 20 per cent of mortgage holders will be in serious mortgage distress if their home loan interest payments increase by three per cent. Home loans have already increased by 1.75 per cent since May.

It comes as separate data from S&P Global revealed which suburbs in Australia are most at risk of defaulting on their home loans.

The Northern Territory came out as the worst state, with the highest percentage of mortgage holders more than 30 days behind on payments.

A fringe suburb in Perth topped the list in terms of debt overdue to the bank, while Sydney, Melbourne, Adelaide as well as some regional areas also received a poor rating.

Of even more concern was that the research was conducted before the Reserve Bank of Australia (RBA) starting increasing the cash rate, meaning these areas will be even more at risk of defaulting on their loans now.

For four consecutive months the RBA has hiked interest rates. Last week, after its August meeting, the central bank brought up the cash rate to 1.85 per cent.

The cash rate has already risen by 1.75 percentage points since May, following two years of interest rates sitting at a record low of 0.1 per cent.

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According to S&P Global, rising mortgage repayments have hit suburbs on the fringes of big cities the hardest.

Their research measured the weighted average of arrears more than 30 days past due on residential mortgage loans in publicly and privately rated Australian transactions.

The Perth suburb of Maddington, 20km from the city centre, topped the list of “Worst performing postcodes” in the report.

As of early April, 4.67 per cent of homeowners in Maddington are in arrears.

That was closely followed by Dolls Point, located in southern Sydney.

Of the mortgaged houses in that NSW suburb, 4.33 per cent are behind on payments.

In third place was another WA postcode, Byford, in Perth’s southeastern edge, with an arrears percentage of 4.16 per cent.

Western Australia had one more suburb on the list – Ballidu in the Central Midlands – while NSW had a total of four.

Bankstown and Castlereagh, from Sydney’s west and southwest, were also experiencing substantial pressure. Katoomba from the Blue Mountains, south of Sydney, also earned a spot in the report.

Victoria, Queensland and South Australia each had one suburb on the list – Broadmeadows in Melbourne’s north, Barkly in Queensland’s Mout Isa region and Hackham, an outer suburb of Adelaide.

A breakdown of each state showed that the Northern Territory was the most behind in its mortgage repayments, at a rate of 1.75 per cent.

Western Australia came in at 1.40 per cent, as of April this year, before interest rates started to be hiked.

Victoria received a score of 0.87 per cent while 0.85 per cent of NSW mortgage holders were also in mortgage arrears.

The ACT fared the best, with an arrears rate of only 0.33 per cent.

Overall, the national average was 0.71 per cent for Australia’s arrears rate, as of April.

“The swift pace of interest rate rises will create debt-serviceability pressures for households with less liquidity buffers and higher leverage,” the report noted, forecasting that sometime in the third quarter of this year a higher arrears rate would show up in new monthly date .

Finder also released a damning statistic about the state of Australia’s home loan debt.

A recent survey conducted last month concluded that more than half a million homeowners would be “on the brink” if interest rates rose by three per cent.

Of those, 145,000 Australis said they would consider selling their home if rates jumped because they would “struggle a lot” to repay them. That represents about five per cent of Australia’s mortgage holders.

The survey also found that 14 per cent of admitted respondents they might fall behind on their repayments or other bills.

Nearly half (48 per cent) would be able to manage, but would have to cut down on their spending, according to Finder.

Only a quarter of participants said a rate rise would not change their lifestyle or spending habits at all.

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Woolworths worker pays for Melbourne mum’s groceries in kind act

Woolworths worker pays for Melbourne mum's groceries in kind act

A Woolworths customer has been left “mortified” after a staff member stepped in to help her out during a tough moment.

The Melbourne woman explained she was having technical issues while paying for her groceries during a recent trip to the supermarket.

At the same time, her newborn baby was “kicking off”, prompting a Woolworths worker to step in and pay for the woman’s groceries.

The customer took to Reddit to explain that while she was very “grateful”, she was also “mortified” over the experience – and wanted to see if there was a way she could thank the woman without getting her in trouble.

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“I just got back from Woolworths where I tried to pay with my phone on self-checkout,” she said.

“It wasn’t working so they printed me a barcode and took me to the service desk to pay, but my phone payment still didn’t work.

“After trying a few times and my newborn kicking off, the staff member said, ‘Don’t worry it’s on me.’

“I was really taken back and asked if I could transfer her the money.

“She said no and then said, seriously it’s on me. My baby was screaming the place down by this point. I was so grateful and also mortified.”

The encounter left the woman asking questions about the Woolies staff member was allowed to do this or if it was “dodgy”.

“I want to go back and give her something to say thank you, but don’t want to get her in trouble if she’s done something she’s not supposed to have done,” she said.

“Anyone work at Woolworths and can tell me what the deal is?”

People were quick to tell the woman to leave it and not draw attention to the worker’s actions.

“Maybe accept the kindness shown and pay it forward to someone else in need. In that way, you don’t risk getting the staff member in trouble,” one person said.

Another added: “What’s more likely? They risk being sacked or even arrested for a total stranger, or pays a few bucks to help out someone obviously trying their best but struggling.

“My partner works at a supermarket and has paid for people before. It feels good. Pay it forward.”

A third, who works at a different supermarket, said: “I’ve paid the difference for a few people that have come up short a couple of times and as far as I’m aware that is completely fine, even seen my boss do Item.

“Don’t know why it would be any different at Woolies. Sounds like excellent customer service to me.”

Another added: “I work at Woolworths, the company only cares if the products are paid for. She likely paid out of her own pocket for you, I’ve done it before.”

Read related topics:MelbourneWoolworths

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Homeowners pay $5k extra in interest on loan over three years unnecessarily

Homeowners pay $5k extra in interest on loan over three years unnecessarily

Sitting back and watching the interest rate rise on your home loan could be costing you hundreds of dollars more a month unnecessarily.

Homeowners are being warned not to fall victim to a “mortgage loyalty tax” by staying with their current lender as banks offer discounts and perks to compete for new customers.

Analysis by RateCity shows all four major banks are offering new customers a significantly lower variable rate than existing customers who have not “haggled” for something better.

The financial comparison site found someone who took out a variable rate loan in September 2019 could be paying an interest rate that’s almost a full percentage point higher than a new customer today.

Looking at Australia’s largest bank as an example, RateCity estimates a Commonwealth Bank customer who took out a $500,000 loan three years ago would have paid an extra $5101 in interest over that time if they had not negotiated.

For a $750,000 loan it is an extra $7,652 in interest and for a $1 million loan it is $10,202.

RateCity explained that in those three years, the bank offered discounts on its lowest variable rates five times to new customers, which meant unless an existing customer called up their bank and negotiated each time, they missed out 0.93 percentage points off their rate.

Addressing RateCity’s findings, Commonwealth Bank said in a statement it was committed to providing existing and new customers with “an array of great value and flexible home loan products”.

It highlighted its “Green Home Offer” where existing customers have access to a low standard variable rate if their home meets certain sustainability and energy efficient criteria.

“We encourage our customers to reach out to us to see how our extensive network of home lending specialists are able to help them find the right solution for their needs,” A CBA spokeswoman said.

The Reserve Bank of Australia increased the official cash rate by 0.50 per cent on Tuesday – the fourth hike in four months.

While the major banks have passed on the rate rises in full to existing customers, they are still offering discounts to bring in new business.

RateCity research director Sally Tindall said banks were “falling over themselves” to offer discounts and perks to borrowers willing to move from a competitor.

“Once the August hikes filter through, a competitive interest rate for owner-occupiers is likely to be around 3.50 per cent,” she said.

“If your variable rate starts with a 4 or even a 5, then you really should question why.”

RateCity found at least 10 lenders have cut variable rates since the hikes began, but only for new customers.

The value of refinanced loans surged by $1.06 billion to $18.16 billion in June, according to the Australian Bureau of Statistics. That is the highest value on record.

As well as rate hikes prompting mortgage customers to shop around, Ms Tindall said many borrowers would be coming off low fixed rate contracts they signed up for during Covid.

“Refinancing hit a record high in June and we expect this will keep on climbing as borrowers roll off their fixed loans, only to find rates have gone through the roof since they last looked at their mortgage,” she said.

“This will in turn push the banks to come up with even more discounts and perks for new customers, particularly refinancers looking to jump ship from a competitor.”

Customers also have the option to call up their bank and negotiate a better interest rate.

“If you do go down this path, do your research before you make the call,” Ms Tindall warned.

“Check what rate you’re on, check what rate your bank is offering new customers, but also what other lenders might be willing to offer you.

“If you have a couple of quotes at the ready for some of your bank’s competitors, they’re likely to take notice.”

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House prices: Interest rate rises and property downturn could be good for buyers

House prices: Interest rate rises and property downturn could be good for buyers

Rising interest rates and uncertainty are causing the property market to cool around Australia. Sydney and Melbourne markets are leading the decline at -2.7 per cent and -0.9 per cent respectively, looking at CoreLogic data.

Based on the Australian Bureau of Statistics (ABS) average property price of $1.2 million in Sydney and $966,500 in Melbourne, this reflects respective discounts of $32,999 and $8699 on the average property today.

With inflation at a 21-year high of 6.1 per cent and interest rates at 1.85 per cent and tipped to continue to rise, it seems likely there will be more pressure on property prices in the short term.

But maybe this could be a good thing. Watching the huge property run over the last couple of years, many people were either priced out of the market or felt property had become overcooked.

With prices on the decline, is it now a smart time to jump in?

State of the property market

Through 2020-21 we saw the value of all property in Australia increase by 23.7 per cent, the strongest growth seen since 2003. In contrast to the weak property market we’re seeing today, for the same time last year the average house price rose $107,000 in Sydney and $41,000 in Melbourne in just three months.

In 2022, we’ve been seeing declines driven by rising interest rates and uncertainty about how the Australian economy is going to ride out the current inflation crisis. The Reserve Bank of Australia (RBA) initially forecast a 15 per cent decline in the property market by the end of 2023, with further falls predicted in 2024.

Worth noting is that not all areas have been (or likely will be) impacted by this downturn equally. We’re seeing property prices hold up more in areas with strong demand and limited supply, and prices weaker in areas that don’t have the same fundamentals. This trend is likely to continue throughout this period of property market disruption.

The key driver of softer property prices is rising interest rates, which have increased by 1.75 per cent over the last four months adding thousands to the cost of repayments on the average Aussie mortgage. With rates forecast to continue rising through 2022 as the RBA grapples with the current global inflation crisis, further pressure will be placed on borrowers and the property market as a result.

Advantages of buying property now

With the property market softening and fewer buyers in the market, people buying property today are doing it at a solid discount to the prices we’ve seen recently.

There’s a lot of fear and uncertainty out there. In my experience helping people with their investing through up and down markets, I’ve found that this uncertainty creates opportunity.

During the height of the Covid crisis there was also a lot of talk about the potential for big property market declines, and a lot of people were too fearful to buy property. Many people were sitting on the sidelines waiting for the uncertainty to pass, convinced there would be a huge crash that would allow them to pick up even more of a bargain.

But before we knew it, the ‘crisis’ was over and the uncertainty was gone. The property market didn’t fail as far as was expected, and many people missed the boat.

In my view, the current conditions are perfect for property buyers to pick up a bargain.

Disadvantages of buying property now

That being said, buying property today does come with risk. The main one that any property buyer needs to manage in the short-term is the likelihood of interest rates rising further.

Rising interest rates for property buyers today mean that you’re highly likely to be paying more for your mortgage in six months than you are today. As mentioned above, rates are tipped to raise around 2 per cent from their current levels in the short-term – meaning you need to be prepared and ready to fund higher mortgage repayments.

There is also potential for property values ​​to fall further in the short-term. Buying and then selling property is an expensive exercise, so you never want to be forced to sell a property. But when values ​​are declining, it’s even more important to protect yourself.

When is the best time to buy property

Looking back, it’s easy to identify ‘good’ times to buy property, but nobody has a crystal ball. We never really know where the property market is going until it actually happens.

And further, while there have been times that we can see would have been better than others to buy property, values ​​have consistently risen over the long-term. That means that over any 10-year period, your asset would have increased in value.

This suggests that the best time to buy was always 10 years ago. The second best time is today.

My view is that if property is on your money road map, now is a great time to buy. You’ll be able to take advantage of the uncertainty, pick up an asset that was a good investment six months ago at a higher price, and move forward on your money journey.

Finding a good quality property is crucial, and having a rock solid plan absolutely necessary to protect your risk. But get these two things right and you’ll be set for success, and will position yourself to come out of this period of disruption in a stronger position than you went into it.

The wrap

Buying property is scary at the best of times, but when fear and uncertainty are high it’s even harder. But property has been one of the most effective ways to invest to build wealth for the last hundred or so years in Australia, and I don’t see that changing any time soon.

Take the time to get your approach right, then make it happen – your future self will thank you for it.

Ben Nash is a finance expert commentator, podcaster, financial adviser and founder of Pivot Wealth, and author of the Amazon best-selling book ‘Get Unstuck: Your guide to creating a life not limited by money’.

Ben has just launched a series of free online money education events to help you get on the front financial foot. You can check out all the details and book your place here.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional.

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Interest rates, inflation: Expert reveals four ways you can save money fast

Interest rates, inflation: Expert reveals four ways you can save money fast

Inflation is through the roof, interest rates are rising and many families are struggling to keep up with their mounting bills.

Finding ways to reduce financial stress can be overwhelming.

For many people, the figures themselves are difficult to grasp — but they know it means they have to tighten their belts.

The Reserve Bank of Australia this week increased the cash rate target by 50 basis points to 1.85 per cent.

Annual CPI inflation also increased to 6.1 per cent in the June quarter, due to higher dwelling construction costs and automotive fuel prices.

So what can you do to relieve your financial pressure?

Curtin Business School instructor and financial planner Elson Goh told NCA NewsWire there were four key ways people could save money.

REFINANCING YOUR LOANS

Mr Goh said everyone with a loan should first contact their current lender to try to get a better deal.

“It is often more costly for a lender to acquire a new customer than to retain an existing one,” he said.

“Go into a bank branch and introduce yourself to the lending manager. It can be easier than dealing with a call center representative.”

Mr Goh also recommends people use a mortgage broker.

“A good broker will negotiate a better deal with your current lender and present other suitable opportunities,” he said.

“Your current lender may respond more favorably if your case is presented well.

“For example, it is pointless to be asking your lender to match the rate that your colleague at work was talking about when their loan size is $800,000 while yours is only $350,000.

“You need the right information such as estimated value of your property and whether or not you have 20, 30 or 40 per cent equity in your home.”

Comparison websites can be a useful tool but Mr Goh warns they are not perfect.

“You have to be cautious as some products may be heavily promoted on these sites and not every lender is represented,” he said.

“Additionally, you cannot focus on just the interest rate or the comparison rate, as there are other things like fees, loan features, loan term and product flexibility that must be considered.

“If you are refinancing your home loan, be mindful of the remaining term of your loan.

“If you have had the property and loan for say five years, and you take up a new loan for over 30 years again, you may be delighted that the monthly repayments are much lower and seemingly more affordable.

“But if you only pay the minimum repayments, you may end up paying more interest over the entire duration and take longer to be mortgage free.”

SWITCHING YOUR SUPERANNUATION

The main types of super funds are employer, retail, industry and self-managed.

Mr Goh said before making a switch you should seek advice if you have a defined benefit scheme, constitutionally protected fund, or benefits paid by the employer.

“You will not be able to restore your entitlements once you switch out to another fund,” he said.

“This can also apply to any insurance policies that you currently have in force within your existing fund.

The tax office website is a good place to start your research.

“However, it is futile to chase after returns as past performance is not a good indicator of future outcomes,” Mr Goh said.

“What you should consider is to ensure that you are paying for services and features that you need and check if the fund is investing at a risk level that you are comfortable with.”

INSURANCE AND UTILITIES

Insurance includes personal, home and content, motor vehicle and health, among others

Mr Goh recommends people seek advice when dealing with personal insurance.

“Your health condition was accepted by the insurance company at the time of application,” he said.

“You are covered under the terms of the agreement as long as you pay your premiums, regardless of the changes to your health.

“Any alterations of your personal insurance may result in reassessment of your current health conditions, which may attract a loading of premiums, exclusion of benefits or outright decline of cover.”

General insurance is different and a cheaper policy is often a result of having less coverage or stricter definition for payout.

But Mr Goh said there were things to consider to ensure you pay for what you need.

“For example, your home insurance cover should only be the amount needed to rebuild your house, not the full purchase price,” he said.

“The excess that you pay upon making a claim is a form of self-insurance.

“Your premiums will become cheaper as you increase the excess on your policy. You can increase the excess if you have available funds saved up and have a low claims history.”

FOOD, GOING OUT AND SUBSCRIPTIONS

When it comes to everyday costs like food and going out, Mr Goh recommends people involve the whole family.

“Rather than trying to formulate a battle plan on your own, you may be surprised by the variety of suggestions that would arise from people with different perspectives,” he said.

Mr Goh said people should make small changes over long periods of time, rather than drastic abstinence.

“It is easier to make small manageable changes than large ones that increase your stress levels. The latter often results in increased spending through retail therapy,” he said.

“Get creative and be flexible with your meals. Substitute ingredients that have gone up in price with more affordable alternatives when cooking.

“Or try preserving vegetables and making jams with produce that are in season or abundance.

“These are some of the things that our grandparents did after the war and they managed to thrive despite experiencing similar if not worse inflationary conditions.”

Mr Goh also recommends people look into their monthly subscriptions.

“They are often payments that get overlooked. If you are not fully utilizing the service or subscription, cancel them,” he said.

He also suggests people find ways to reuse and recycle where possible.

“You can breathe new life into old furniture with a new coat of paint or a box of screws,” he said.

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Australian house prices: 300 suburbs that have significantly dropped in value

Australian house prices: 300 suburbs that have significantly dropped in value

As skyrocketing interest rates smash the Australian housing market, a dozen suburbs have already seen property prices fall by more than $500,000 since March.

PropTrack’s automated valuation model (AVM) data show more than 300 suburbs across the country where dwelling values ​​have experienced six-figure falls over the quarter.

In percentage terms, the worst-performing suburb in the country was South Hedland in WA’s Pilbara region, where units dropped by 24.81 per cent to a median value of $213,791 in June 2022 – a loss of more than $70,000.

That was closely followed by Booval in Queensland, where unit prices were down 24.64 per cent, or more than $121,000, to $370,231.

But it was wealthy suburbs in the capital cities that experienced the largest falls in dollar terms, with parts of Sydney’s northern beaches and eastern suburbs, Melbourne’s Mornington Peninsula, as well as inner-city Perth and Canberra all experiencing falls in excess of half a million dollars.

Former Prime Minister Malcolm Turnbull’s eastern suburbs home of Point Piper recorded the biggest fall in dollar terms, with units there losing nearly $715,000 in value – a 14.82 per cent fall from $4.82 million to $4.11 million.

Manly came in second place with losses of nearly $680,000 in house prices, representing a 13.8 per cent fall from $4.92 million to $4.25 million.

Ingleside on Sydney’s northern beaches saw house prices fall nearly $610,000 to $2.77 million, while Flinders in Melbourne suffered a $600,000 fall to $2.51 million.

Other suburbs where house prices fell by more than $500,000 include Clontarf, Dover Heights, North Bondi, Bronte, Rose Bay and Bondi Beach in Sydney, Peppermint Grove in Perth and Griffith in Canberra.

Close behind in the $400,000 range were the likes of Double Bay and Tamarama in Sydney, Red Hill – both in Victoria and Canberra – and Mulgoa at the foot of the Blue Mountains.

“Price falls are largely being led by the ‘high end’ of the market and higher value suburbs,” said PropTrack senior economist Eleanor Creagh.

“Manly and Tamarama in Sydney have all posted declines in quarterly values.

“Previously popular suburbs in the Central Coast and Melbourne’s Mornington Peninsula have also seen values ​​decline.

“It’s often the case that the upper end of the market experiences larger price declines, and at the moment it’s the suburbs that are home to more expensive properties that are seeing bigger price falls than more affordable properties.”

It’s not all bad news for homeowners, however.

House prices in some suburbs are still rising, led by Balmain East in Sydney’s inner west, which saw house prices rise more than $329,000 over the quarter to $3.48 million.

New Farm in Brisbane was second with house price growth of more than $295,000 to $2.65 million, followed by Coledale in NSW’s Illawarra region, which was up nearly $289,000 to $2.47 million.

Other suburbs where dwelling values ​​rose more than $200,000 were Newcastle East, The Rocks and Waterloo in Sydney, and Brisbane’s Bowen Hills, Tenerife, Highgate Hill and West End.

“While the current cycle of exceptional price growth is winding down Australia-wide, there are some parts of the country bucking the falling price trend,” said Ms Creagh.

“Parts of Brisbane, Adelaide and regional Australia are proving more resilient.

“With the pandemic driving a boom in remote working, housing markets in parts of regional Australia have emerged, with sea and tree changers looking for lifestyle locations, larger homes, and beachside living.”

The ongoing low supply of properties available for sale, combined with relative affordability advantages driving heightened demand, are causing prices to continue to rise in some regional areas or only just beginning to fail as the impact of higher interest rates weighs on the market.

“As the home price cycle has matured and interest rates are now rising, some suburbs in previous regional hot spots on the Sunshine Coast, and in the Southern Highlands and Geelong regions are starting to see larger price falls, with affordability advantages having been eroded since the pandemic onset,” Ms Creagh said.

“Suburbs like Lorne, Sunshine Beach, Minyama and Noosa Heads have all seen quarterly declines in unit or house values.”

She added it was a similar picture in the capital cities, with markets that led the upswing like the “lifestyle and coastal locations of the northern beaches and eastern suburbs now seeing larger price falls”.

It comes after the Reserve Bank hiked interest rates for the fourth month in a row on Tuesday.

The 50 basis-point increase at the central bank’s August meeting brings the official cash rate to 1.85 per cent, up from the record low 0.1 per cent it was up until May.

Governor Philip Lowe said the RBA had made the decision to raise the rates in a bid to drive down the current 6.1 per cent inflation figure.

In a statement, he said the path to returning to inflation under 3 per cent while keeping the economy on an even keel was something that would take time.

“The path to achieve this is a narrow one and clouded in uncertainty, not least because of global developments,” Dr Lowe said.

“The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia’s invasion of Ukraine, and the Covid containment measures in China. Today’s increase … is a further step in the normalization of monetary conditions in Australia.”

Already, the rise in interest rates has pushed house prices down in most major cities as borrowers stare down the barrel of higher monthly payments.

PropTrack’s Home Price Index shows a national decline of 1.66 per cent in prices since March, but some regions have seen much sharper falls.

“As repayments become more expensive with rising interest rates, housing affordability will decline, prices pushing further down,” Ms Creagh said earlier this week.

Last week, the Australia Institute’s chief economist, Richard Dennis, told NCA NewsWire the RBA was one of the biggest threats to the economy at the moment.

“If we keep increasing interest rates because inflation is higher than we’d like, we might cause a recession,” he said.

“Increasing interest rates won’t help us prepare for a slowing global economy … but they might actually further dampen the Australian economy.”

[email protected]

– with NCA NewsWire

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RBA interest rates: Westpac decreases fixed rates as three big banks pass on full 0.50 percentage point rate hike

RBA interest rates: Westpac decreases fixed rates as three big banks pass on full 0.50 percentage point rate hike

Westpac Bank has made a surprising move, choosing to spare some customers from escalating price hike pain.

The big bank has announced it will be decreasing its four-year owner occupied fixed interest rate by one per cent, down to 4.99.

Westpac is the third of the big banks to announce its rate changes following the Reserve Bank of Australia’s decision to increase the official cash rate by 0.50% per annum (pa) on Tuesday.

The big bank has unsurprisingly followed its rivals the Commonwealth Bank and ANZ in increasing its variable home loan interest rates.

The interest rate changes will come into effect for new and existing home loan variable rate products on Thursday, August 18.

Earlier today, ANZ joined CBA in announcing it will be passing on the hike to variable rate mortgages and one savings account by the full 0.50 percentage points.

The major bank said its up-scaled up mortgage rates will come into effect for both new and existing customers from Friday, August 12.

The lowest variable rate will now be increased to 3.69 per cent – ​​just under that of CBA, which pumped up its lowest rate to 3.79 per cent.

Both rates are at three-year highs.

The ANZ decision also included increasing the rate on its new ANZ Plus Save account by 0.50 percentage points to 2.50 per cent for balances up to $250,000, which will come into place on Monday.

The move came just hours after Australia’s biggest bank, the Commonwealth Bank, announced it will pass on the full 0.50 percentage point hike to its variable home loan customers and some savings customers.

CBA will bring its occupier principal and interest standard variable home loans rate to 5.8 per cent.

Uncharacteristically, Australia’s other big banks have been slow off the blocks following the RBA’s decision on Tuesday, with CBA’s competitors Westpac, NAB and ANZ yet to make their announcements.

Mortgage rates for new and existing customers at CBA will rise by 0.50 percentage points on August 12, with investor rates rising to 6.38 per cent.

Research director at RateCity.com.au Sally Tindall said while the CBA’s decision comes as no surprise, for customers who are already feeling the heat, this fourth hike is a “difficult pill to swallow”.

“From next week, CBA’s basic variable rate will hit a three-year high of 3.79 per cent – ​​a huge increase from three months ago when it was just 2.19 per cent,” she said.

For an owner-occupier with $500,000 debt and 25 years remaining, the 0.5 percentage point hike means they will see their monthly repayments rise by $140.

To ease the strain, Commonwealth Bank is cutting its lowest four-year fixed rate to 4.99 per cent – ​​a drop of 1.60 percentage points.

This special rate, which comes into play on Friday, is strictly for owner-occupiers paying principal and interest on a package rate ($395 annual fee) for a limited time.

While Ms Tindall said the “whopping cut” will make it the lowest in its category, she warned it may not necessarily be a good idea.

“People should think carefully about whether they want to lock up their mortgage for the next four years because there can be significant consequences if they decide to break their loan,” she said.

For those with a NetBank Saver account, who will see the full rate hike, the research director said an ongoing rate of just 0.85 still won’t cut it.

“In this market, where we could see ongoing rates over 3 per cent, these savers are still getting paid peanuts,” she said.

But Ms Tindall said there are signs things could be turning around.

“On Tuesday, Macquarie announced it was making significant cuts to its fixed rates and now CBA is following suit,” she said.

“We expect this will trigger further fixed rate cuts from other lenders in response to both evolving market expectations and competition among the banks.”

Read related topics:westpac

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Interest rates: Peter White urges borrowers to beware of the hidden dangers associated with refinancing following RBA rate rise

Interest rates: Peter White urges borrowers to beware of the hidden dangers associated with refinancing following RBA rate rise

A leading loans expert is urging mortgage holders to be wary of the hidden dangers associated with refinancing as the big four banks look to entice more customers with “cheap deals” following this month’s rate rise.

Peter White AM, the managing director of the Financial Brokers Association of Australia (FBAA), is asking Australians who are considering whether they should switch up their home loan to proceed with caution, warning that “cheaper isn’t always better”.

The director’s message comes after the Reserve Bank of Australia increased the cash rate by 50 basis points for the fourth time in as many months on Tuesday.

With the base rate now standing at 1.85 per cent, Mr White is asking borrowers to be on alert as major banks look to lure vulnerable customers who are struggling with their repayments to sign up to its services.

“Some banks at the moment are offering cheap variable rates to new borrowers only. This is a trap,” Mr White told news.com.au.

“For the lender it’s about using a marketing budget to generate more customers, knowing that most customers will stay as it costs to change again.”

It’s all part of a “vicious cycle” lenders use to draw customers into borrowing from them, Mr White explained, where new customers are blindsided as the rate on offer doesn’t always mean the customer will be better off in the long term.

“There is a hidden danger at times like this that is rarely spoken about,” Mr White said.

“Banks will be looking to attract those considering refinancing as new customers, and will offer cheaper variable interest rates that are significantly below their fixed rates, which are rapidly climbing. This is a case of ‘buyer beware’.”

Cashbacks and exclusive rates at discount prices for new customers are some of the lures banks are using to attract new borrowers.

Both come at the cost of disadvantaging the lender’s current customer base as their higher interest rates make up for the lower rate offered to new customers.

“Borrowers should be aware that next time around they will be the existing customer facing higher rates and will be disadvantaged during rate increases,” Mr White said.

“It’s an old game to lure new customers with a perceived advantage only to be taken advantage of with the next move.”

Additionally, some banks use a tactic where they attempt to give you a better rate after you’ve agreed to another offer.

“If they were serious about looking after you they would have offered this when you first approached them, so ignore this offer and don’t be distracted as this will cause you even more headaches, and makes the process even more complex,” he said .

While Mr White advises borrowers to refinance with caution, saving on your home loan isn’t entirely off the cards.

Rather than focusing on the big four banks, Mr White recommends looking at what second tier banks such as Suncorp, and non-banks such as Bluestone, have on offer.

“Going with the major banks is often the most expensive way forward and may not be in your best interests due to constraints and other factors specific to you,” Mr White said.

“Remember the big banks can only sell you their products, and their aim is to look after themselves and their shareholders, not to act in your best interests.”

It’s also advised that borrowers go through a mortgage broker, rather than directly through a bank. Brokers are free to use as they receive commission from lenders once they sign a customer up to a service.

They also have access to a range of offers that aren’t always available to borrowers who go through the back directly and can find a rate and repayment schedule that suits a borrower’s needs.

“A finance broker is obliged to act in your best interests and sometimes this means explaining that the best option may be not to refinance,” Mr White said. “(They’re also) charged by law to act in your best interests, whereas banks are not.”

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