The Impact of A Potential Cash Rate Increase On The Housing Market

When we think about the housing market, our minds often gravitate towards the more apparent factors like property prices, demand, and mortgage rates. Recently, the spotlight has shifted towards a potential cash rate increase as inflation data released by the Australian Bureau of Statistics showed Consumer Price Index (CPI) rose 1.2% in the three months to September 2023 and 5.4% annually.

What Are The Odds Of A Cash Rate Increase?

While many economists had predicted that the cash rate would hold in November 2023, they are revising their predictions. Jonathan Preston, Senior Mortgage Broker at Home Loan Experts, believes there’s a growing likelihood that the cash rate will increase. He explains, “I think it definitely strengthens the chance of another hike. It’s probably 60/40 leaning toward a hike, in my opinion.”

The Ripple Effects On The Housing Market

So, what are the potential repercussions for the housing market if the cash rate increases? Preston offers some insights, “Sentiment could drop if rates hike, clearance rates go lower, asking prices go lower, and there could be less appetite for transactions.”
Preston suggests the rate hike could result in a slowdown in the property market. It’s an outcome that’s not on everyone’s radar but has consequences for homeowners and potential buyers. He further adds, “I am of the opinion that another rate hike will accelerate rate cuts.” This may be surprising, especially in a landscape where many economists are predicting ‘higher for longer’ – a scenario where interest rates remain elevated for an extended period. But as we’ve learnt from the past, such consensus doesn’t always materialise. During the height of the pandemic, many economists said that cash rates would not rise, yet here they have gone up four percentage points since last year.

Opportunities On The Horizon

Amidst the uncertainty, there’s a silver lining. Preston explains, “Similar to the buying opportunities we saw last year, there could be another opportunity to pick up properties at discounts. We just have to ensure people feel confident enough to act. In 2022, people were holding off for lower rates and lower prices – and neither of those has happened.”
At Home Loan Experts, we are here to help you through rate rises. Call us on 1300 889 743 or enquire online.