The Reserve Bank of Australia has hiked the cash rate by 50 basis points to 1.35%, pushing up interest rates and adding further pressure to the country’s slowing housing market.  

Commonwealth Bank, ANZ, NAB, Westpac and other banks have passed on the latest rate rise to mortgage holders.  

The rate hike comes after the RBA raised the cash rate by 50 bps in June and 25 bps in May.  

RMIT University’s Dr Woon Weng Wong said the rising cash rate would undoubtedly have a negative impact on the residential property market.  

“Further cash rate rises are expected for the remainder of the year as the RBA aggressively targets inflation, which does not appear to be abating anytime soon with the conflict in Eastern Europe, the energy crisis, labour shortages and recent extreme weather events continuing to wreak havoc on the Australian economy,” Dr Wong said.  

“The cash rate is expected to eventually settle at 2.5% by the middle of next year. 

“House prices will likely continue their downward trajectory with modelling by the RBA’s latest financial stability review indicating a 15-20% decline over a two-year window based on the assumption of a 200-basis point rate rise.”  

CoreLogic Research Director Tim Lawless said further interest rate rises were expected throughout the rest of the year and into 2023, adding additional downside risk for housing demand.   

“Sydney and Melbourne home values have been trending lower through the past five months, and it’s likely this downwards momentum will spread to other capital cities and regional markets over the coming months,” Lawless said.  

“The trajectory of home values will depend on how fast and how high-interest rates move, along with the performance of the broader Australian economy, labour markets and demographic trends.  

“A stronger economy, along with the tightest labour market conditions in a generation, should help to ensure the ensuing housing downturn remains orderly.” 

CoreLogic estimated the average variable mortgage rate for a new owner-occupier loan would be around 3.66%, up from 2.41% in April. 

For a borrower with a $500,000 housing debt, with principal and interest repayments on a variable rate mortgage, the average monthly repayment would have risen approximately $366 per month since rates started rising.   

For a $1 million loan balance, repayments would be up around $732 per month.