Why a surprising number of Australians want interest rates to rise

Nearly one in three Australians wants the Reserve Bank to raise interest rates, even if that would lead to borrowers paying $ 560 a month extra on their loans within a year.

Continuous property price increases have caused Sydney’s median house price to rise by 30.4 percent in a year to even more unaffordable $ 1.334 million in October, CoreLogic data showed.

With a 20 percent deposit of $ 266,753, someone would still owe the bank $ 1,067 million and pay nearly $ 5,000 a month in mortgage payments.

With many younger Australians and middle-income Australians locked out of the housing market, record low interest rates are being blamed for an overheating market, and a significant minority want monetary policy tightened to stem inflation.

A surprising number of Australians want the Reserve Bank to raise interest rates, although this would lead to borrowers paying $ 560 a month extra on their loans within a year (pictured is a house at Toongabbie in the west of the city)

A surprising number of Australians want the Reserve Bank to raise interest rates, although this would lead to borrowers paying $ 560 a month extra on their loans within a year (pictured is a house at Toongabbie in the west of the city)

House prices continue to rise in Australia

SYDNEY: Up 30.4 percent to $ 1,333,767

MELBOURNE: Up 19.5 percent to $ 972,659

BRISBBANE: Up 24.8 percent to $ 731,392

ADELAIDE: Up 22.5 percent to $ 591,558

PERTH: Up 16.7 percent to $ 550,044

HOBART: At 27.2 percent $ 726,955

DARWIN: Up 17.1 percent to $ 567,056

CANBERRA: Up 29 percent to $ 985,040

Source: CoreLogic data in median house price increases in the year to October 2021

Nearly a third, or 29 per cent, of the 1,280 consumers surveyed last month by financial comparison group Canstar want the Reserve Bank of Australia to raise interest rates, with cash rates on Tuesday back at a record low of 0.1 per cent. .

Canstar Chief Financial Officer Steve Mickenbecker said an initial rate hike is likely to be followed by others, which will see cash rates rise by 1 percentage point within a year.

“It could be a case of ‘be careful about what you want’ for almost one in three Australians who would welcome rate hikes, as the resulting mortgage stress would be a major drag on the economy beyond house prices,” he said.

Should mortgage rates rise by 1 percentage point, a person who borrows $ 1 million with an average standard variable rate of 3.1 percent will see their monthly repayments rise by $ 561 within a year to $ 4,826.

The Reserve Bank has repeatedly promised to keep the cash rate at a record low level of 0.1 percent ‘at the earliest’ and did so again on Tuesday at its meeting in November.

But Gov. Philip Lowe issued a statement Tuesday suggesting the central bank could raise interest rates by the end of 2023.

“The board is prepared to be patient, with the key forecast being that underlying inflation will not be higher than 2.5 per cent by the end of 2023 and only a gradual increase in wage growth,” he said.

Both targets for underlying inflation grew by 2.1 per cent. in the year to September, which was on the low side of the Reserve Bank’s target of 2 to 3 per cent.

With many younger Australians and middle-income Australians locked out of the housing market, record low interest rates are being blamed for an overheating market with a significant minority wanting monetary policy tightened to curb inflation (pictured are shoppers at Sydney's Pitt Street Mall)

With many younger Australians and middle-income Australians locked out of the housing market, record low interest rates are being blamed for an overheating market with a significant minority wanting monetary policy tightened to curb inflation (pictured are shoppers at Sydney’s Pitt Street Mall)

This measure removes volatile items such as gasoline prices, which in recent weeks have risen to an average of $ 1.72 per liter. liters in Sydney and Melbourne for the first time.

With large price increases included, total inflation also known as the consumer price index rose by 3 per cent.

“Inflation has risen, but in underlying terms it is still low, at 2.1 percent,” said Dr. Lowe.

‘Overall CPI inflation is 3 per cent and is affected by higher petrol prices, higher prices for newly built homes and disturbances in global supply chains.

“A further, but only gradual, increase in underlying inflation is expected.”

KPMG’s chief economist Dr. Brendan Rynne said borrowers with a standard variable mortgage rate would end up paying more even if Reserve Bank left the cash rate on hold.

The Reserve Bank has repeatedly promised to keep the cash rate at a record low level of 0.1 percent 'at the earliest' and did so again on Tuesday at its meeting in November.  But Gov. Philip Lowe issued a statement on Tuesday suggesting the central bank could raise interest rates by the end of 2023 (pictured is the RBA building on Martin Place in Sydney)

The Reserve Bank has repeatedly promised to keep the cash rate at a record low level of 0.1 percent ‘at the earliest’ and did so again on Tuesday at its meeting in November. But Gov. Philip Lowe issued a statement on Tuesday suggesting the central bank could raise interest rates by the end of 2023 (pictured is the RBA building on Martin Place in Sydney)

“It will not prevent borrowing costs from rising from now on, as retail banks are raising lending rates in response to higher lending costs in the wholesale market,” he said.

Canstar Chief Financial Officer Steve Mickenbecker said an initial rate hike is likely to be followed by others, which will see cash rates rise by 1 percentage point within a year

Canstar Chief Financial Officer Steve Mickenbecker said an initial rate hike is likely to be followed by others, which will see cash rates rise by 1 percentage point within a year

A professional who earns an average full-time salary of more than $ 90,329 a year is already in mortgage stress and is paying a typical Australian home despite the fact that interest rates are at a record low.

They would struggle to pay their bills because the Australian Prudential Regulation Authority considers a debt-to-income ratio of six or more to be risky.

In the year to October, Australia’s median property price rose 21.6 percent to $ 686,339, with new CoreLogic data showing the fastest annual increase since early 1989.

This means that a person who buys a typical home, with a 20 percent deposit included, will owe the bank $ 549,071.

APRA, the banking supervisory authority, is now demanding a loan to assess a borrower’s ability to cope with a 3 percentage point increase in mortgage rates, with the new rules coming into force on 1 November.

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