Higher interest rates, poor affordability leading to ‘hostage housing’


Westpac economists believe the future of the housing market will effectively become “hostage” to broader economic outcomes.

Housing sentiment points to declining turnover through the first half of this year, showing a “clearer” sign that the housing market is slowing, according to Westpac’s February 2022 Housing Pulse.

With mortgage rates already rising and a rise in RBA cash rates forecast for 2022, a housing “correction” is forecast for 2023 and 2024.

Calling the current market the “calm before the storm”, Westpac economists said the new rate outlook – influenced by inflation and labor market challenges – is expected to ripple through all Australian property markets.

Another factor weighing on housing markets is the “deterioration” of affordability, which is affecting buyer sentiment, but interest rate considerations are “not really having an impact yet”.

Real estate turnover showed a “very strong” rebound after the Delta shutdowns, but has seen a “slight decline” since the Omicron outbreak late last year.

Nationally, prices are up 2.5% since November 2021 – a further decline from a peak of 7.1% in May 2021 – but annual gains remain “impressive” at 21.1%.

The Housing Pulse report shows that housing sentiment was largely unaffected – apart from a slight and brief loss of confidence around employment – with the dominant themes continuing to be around high prices and in rising real estate and stretched affordability.

According to Westpac economists, the “shock” of a rate hike will impact all markets over the next few years.

They said housing was becoming ‘hostage’ to the economy, with the outlook relying heavily on how well policymakers – particularly the Reserve Bank of Australia – get Australia through these ‘threat’ challenges.

Which states are the most sensitive to rising interest rates?

Westpac economists said state trends showed “further divergence”, with individual states falling into three distinct groups – most sensitive, least sensitive and least sensitive to affordability pressures and higher mortgage rates. .

They called NSW and Victoria more susceptible, with lower property turnover, high rental vacancy rates in cities and a lack of immigration weighing heavily.

WA and Tasmania are “less sensitive”, thanks to slightly better accessibility than more sensitive states, fewer covid impacts and a “tight” supply-demand balance with lower vacancy rates.

SA and Queensland are labeled as the least sensitive, with strong price momentum and a “super tight” supply-demand ratio, and high turnover.

In Brisbane, house prices have risen by just under 30% over the past year, with December posting a “mezzling” gain of 8.5%.


Are you buying a house or looking to refinance? The table below shows home loans with some of the lowest interest rates on the market for homeowners.


Rate Type Gap Redraw Ongoing charges The initial costs LVR Lump sum reimbursement Additional refunds Pre-approval

Variable More details

Smart Booster Home Loan Discounted Variable – 2 years (LVR
  • Fast turnaround times, can meet 30 day settlement
  • For purchase and refinancing, down payment min 20%
  • No ongoing or monthly fees, add 0.10% compensation

Variable More details

Low Rate Home Loan – Premium (Principal & Interest) (Owner Occupant) (LVR
  • No upfront or ongoing fees
  • 100% cleared account
  • Additional refunds + withdrawal services

Variable More details

Homeowner Accelerates – Celebrate (LVR
  • We lower your rate based on the amount you have paid back on your loan
  • Automatic Rate Matching
  • No upfront or ongoing fees

Variable More details

Careful variable real estate loan (capital and interest) (LVR
  • No ongoing fees – None!
  • Unlimited additional refunds
  • Redraw – Access your extra payments if you need them

Variable More details

Owner Occupied Variable, Principal & Interest (Refinance Only)(LVR
  • No application or ongoing fees.
  • 100% free clearing sub-account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Variable More details

Green real estate loan (capital and interest)

  • Quick turnaround, can meet 30 day settlement
  • Save Thousands of Dollars and Make an Eco-Friendly Choice on Your Loan for Homes Under 12 Months

Image by mohamed_hassan from Pixabay

The entire market has not been taken into account in the selection of the products above. Instead, a reduced portion of the market was considered. Products from some vendors may not be available in all states. To be considered, the product and price must be clearly published on the product supplier’s website. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au and Performance Drive are part of the Savings Media group. In the interest of full disclosure, Savings Media Group is associated with Firstmac Group. To learn how Savings Media Group handles potential conflicts of interest, as well as how we are paid, please visit the website links at the bottom of this page.


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