Home buying intentions up despite expected interest rate hikes

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CommBank’s Household Spending Intentions Index rose 1.8% in February to 107.3 as home buying intentions rose despite expected loan interest rate hikes real estate.

Spending intentions for household services rose 4.1%, according to CommBank’s latest Household Spending Index (HSI). This includes activities such as home renovations, as well as the use of services such as childcare and personal care.

Transportation spending intentions also rose 11% in February on the back of higher fuel prices, as well as increased spending on taxis, parking lots, car washes, freight and trucking services.

Spending intentions to buy a home are up 29.6% in February compared to January 2022, after the traditional holiday dip. However, this is a 4.4% decline from February 2021, at the height of home buying intentions after the first Covid-19 lockdowns.

This data is in line with the Commonwealth Bank’s earlier forecasts for real estate market values. House prices in Sydney and Melbourne are now expected to fall by 3% in 2022 and a further 9% in 2023.

In fact, a recent study by RateCity found that if these predictions are correct, the median house price in Sydney could once again fall below the $1 million mark, dropping around $146,651 by the end of 2023. at $969,568.

ABC Chief Economist Stephen Halmarick said this new research from February showed Australians were “back on the move” after COVID restrictions ended.

“Following the usual seasonal mildness in January and the effects of the Omicron variant, it was good to see spending intentions rebound in February. reinforces our view that as Australians recover outdoors, the economic outlook for 2022 is a year of solid growth,” he said.

And a rise in cash rates could also be on the cards over the next few years, with Australia’s biggest banks planning a series of RBA-led rate hikes as early as June, according to the CBA.

“Given soaring inflation as well as strong employment and wage growth, we maintain our view that the Reserve Bank of Australia will need to raise interest rates sooner than expected, with an increase initial at 0.25% in June this year, rising to a peak of 1.25% in early 2023,” Halmarick said.

Australian households grappling with higher costs

Higher interest rates will lead to larger mortgage repayments for millions of Australian homeowners and could reduce home buying intentions, even if house prices fall.

For potential buyers concerned about buying in a higher cost mortgage environment, there are steps they might consider taking, including:

  1. Carefully compare your options: Take your time to carefully choose the most competitive mortgage lender before you sign on the dotted line. Look outside your childhood bank and use comparison tools, like charts and calculators, to find your best option.
  2. Make additional refunds: Paying off as much of your debt before a possible rate hike can help lessen the impact of higher interest on your household budget.
  3. Prepare for progressive hikes: The major banks have forecast continued rate hikes over the next few years. If you choose a fixed-rate home loan, set a reminder two months before it ends so you can assess the market and make sure you’re still with the most competitive lender. Once your fixed rate period is over, your home loan will generally revert to a higher variable rate unless you plan to take action and refinance.
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