How interest rate hikes will impact West Australians’ mortgage repayments

A projected 2% interest rate hike will cost Perth homeowners more than $5,500 a year, but the good news is that their property values ​​are expected to rise this year.

That’s the view of several experts, who believe WA property prices – unlike the rest of Australia – will defy the expected interest rate hikes the Reserve Bank says it is about to hit.

Most banks are forecasting a 1-1.25% increase in the cash rate this year, and a total increase of 2-2.25% by the end of 2023 or 2024.

According to Canstar, with the average new home loan in WA being around $465,000, a 2% increase in interest rates will increase mortgage repayments by more than $5,500 per year.

Independent property forecaster Gavin Hegney expects variable rates to rise to 5% within two years, but thinks that won’t stop Perth’s property juggernaut.

He disputes Reserve Bank modeling which predicts a 15% drop in property values ​​following a 2% rise in interest rates, saying Perth was out of cycle with the rest of the country.

He expects property prices in Perth to rise by 10% each year for the next two years, partly due to the decade of slow growth before last year’s boom.

He said WA’s chronic undersupply of housing, high rental yields, high employment and low rental vacancy rates, as well as exploding construction costs and the backlog of construction would add to the pressures that will continue to drive up house prices.

Mr Hegney said borrowers over the past few years had been rated by banks on their ability to service interest rates at around 6%, saying affordability was unlikely to be an issue.

Camera iconIndependent property forecaster Gavin Hegney expects market forces to eventually bring Perth back to its long-term average as Australia’s fourth most expensive property, along with currently the most affordable. Credit: Unknown/Provided

He expected market forces to eventually bring Perth back to its long-term average as the fourth most expensive property in Australia, currently the most affordable.

But Commonwealth Bank is less optimistic, with new forecasts predicting a 2% rise in prices this year, followed by a 6% fall in values ​​in 2023. The bank says the market is very sensitive to changes in interest rates. ‘interest.

Professor Steven Rowley of the Bankwest Curtin Economics Center believes that house price growth this year will be modest and uneven.

Mortgage Choice broker Mark Wilkins said it usually takes two to three successive rate hikes to slow the market.

He believes the key factor affecting WA’s market response is population growth, as WA’s many jobs attract important new workers.

The Real Estate Institute of WA officially expects prices to rise by 10% this year, but Vice President Joe White said yesterday he believed increases would be closer to 2-5% this year.

He said a number of announcements suggested that sellers were expecting the market to have peaked.

HOW YOUR PAYMENTS WILL INCREASE

$300,000 MORTGAGE

Interest rate – monthly repayments

3% – $1,264

3.5% – $1,347

4% – $1432

4.5% – $1,502

5% – $1610

* A 2% increase corresponds to a monthly increase of $346 or $4,152 over the year.

$400,000 MORTGAGE

Interest rate – monthly repayments*

3% – $1,686

3.5% – $1,796

4% – $1909

4.5% – $2026

5% – $2147

* A 2% increase corresponds to a monthly increase of $461 or $5,532 over the year.

$500,000 MORTGAGE

Interest rate – monthly repayments

3% – $2,108

3.5% – $2,245

4% – $2387

4.5% – $2,533

5% – $2684

* A 2% increase corresponds to a monthly increase of $576 or $6,912 over the year.

* Loan over 30 years

-Source: Mark Wilkins, Mortgage Choice Wembley


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