Speaking at the Australian Financial Review’s (AFR) property conference on Monday, Reserve Bank of Australia’s (RBA) head of domestic markets Jonathan Kearns expressed his take on the impact of interest rate hikes on domestic housing prices.
“Higher mortgage repayments are offset by shrinking loan sizes as house prices start to decline.”
“Estimates suggest the net effect is that mortgage payments for new buyers would be higher for about two years as a result of higher interest rates.”
“But after that, the declines in housing prices and mortgage size begin to dominate.”
“Many factors other than interest rates also influence housing prices.”
“For example, the demand for housing would be greater with stronger household income growth, increased population through immigration, or a preference for fewer people living in each household.”
AUD/USD is trimming losses on the above comments, trading at 0.6707, still down 0.16% on the day.