The Reserve Bank’s latest interest rate hike is about to make buying more difficult for some househunters.
Competition for already sought-after affordable properties is about to heat up across Adelaide, as the latest interest rate rise threatens to slash buyers’ borrowing capacity.
Loan Market Glenelg director Joey Delis said those looking to secure a $800,000 to $900,000 home loan could end up having between $40,000 and $70,000 cut from their borrowing capacity following the Reserve Bank’s decision to raise the cash rate to 4.10 per cent.
Those who didn’t have any extra cash available to purchase the home they wanted would end up flooding the affordable end of the market, he said.
“From what I’ve seen, the lower end of the market seems to be being pushed up because there’s a bit more people competing,” he said.
“The lower end of the market is still where the volume is.”
MORE: Affordable housing option now out of reach for many
Borrowing capacities will be slashed under the increase and homeowners will have to dig deep to find the extra cash to pay their loans.
Mr Delis said many prospective buyers, especially those looking for their first home, would rather make sacrifices and change what they were looking for to ensure they still had a chance to get into the market.
“All of a sudden we’re looking at courtyard units, strata, anything they can just get into,” he said.
“It’s a dreadful time to be trying to buy.”
He said Adelaide homeowners were also going to feel the pinch, with many already struggling about to be hit harder.
“We were told interest rates were going to come down slowly (at the start of the year), but the war has thrown a spanner in the works, no one’s prepared,” he said.
Mr Delis urged mortgage holders to push their banks for discounts or ask their brokers to review.
Loan Market Australia data shows first-home buyer applications surged late last year, while mortgage settlements hit record highs in December.
MORE: ‘A joke’: Studio with toilet in shower sparks fury
However, momentum has started to soften, with Loan Market recording a 25 per cent decrease in first-home buyer loans in the first week of March compared to the first week of February.
It comes as 56 per cent of South Australians believe property is the best investment to build wealth for retirement planning and 53 per cent plan to own a home before then, according to Loan Market Australia figures.
Meanwhile, LJ Hooker research and business intelligence head Matthew Tiller anticipated the prestige end of the market would be most impacted by the rise, where mortgage holders tended to have bigger loans and were more sensitive to rate fluctuations.
“We expect property prices to continue to rise; however, sales could slow in the top end of the market, which in Sydney and Melbourne is above $3 million, above $2 million in Brisbane and $1.5 million in Adelaide,” he said.
Help us improve your reading experience
Got a minute? Your feedback will help us build a better experience for you.
Help us improve this page
English (US) · 