Mortgage rate hikes bad for entire property market: CoreLogic

Mr Kusher said that despite the rate increases being relatively small, the effect on housing market sentiment is likely to be significant.

He added that the rate hikes are likely to exacerbate the already existing declines in Sydney, Melbourne, Perth and Darwin, pushing them down further as well as slowing down existing growth elsewhere.

Mr Kusher claimed the timing of the rate hikes were particularly “interesting” for two reasons.

He said the first reason was the difference between previous targeted impacts on investors and the current impacts on owner occupiers. In the recent market downturn, there has been declines of 5.6 per cent from Sydney’s peak and 3.5 per cent from Melbourne’s peak, which stemmed from higher rates for investors and reduced affordability, while owner occupiers were relatively safe. Now, the recent hikes are also impacting on owner occupiers and the whole market is affected as a result, Mr Kusher said.

The second reason was due to coinciding with the beginning of spring, he said.

“Although spring, in my mind and according to the data, is somewhat overhyped as a good time to sell, more stock does typically become available for sale over the period and buying activity typically increases,” Mr Kusher said.

“The other usual occurrence at the beginning of spring is that lenders offer enticing mortgage rates to the market to jostle for market share. By contrast this year, major lenders are announcing higher mortgage rates.”

“Overall this move seems likely to lead to a continuation of the currently weak housing market conditions over the coming months and may weaken the market further,” Mr Kusher said.

“From the lenders’ perspective, clearly they realise that the housing downturn is becoming entrenched (particularly in Perth and Darwin, but more recently in Sydney and Melbourne) and they are doing what they can to maintain profitability in the face of lower mortgage volumes.”