9 June 2023

Ouch! ACT homeowners feel the stress of another rate rise

| Ian Bushnell
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Apartment Building

With borrowing capacity shrinking, more first-home buyers are looking at apartments just to get into the market. Photo: Zen Photo.

The proportion of family income needed to meet home loan repayments is heading into mortgage stress territory for ACT homeowners after Tuesday’s interest rate increase, the 12th since May last year.

The repayments figure is up almost 10 per cent over the year to March, according to the Real Estate Institute’s latest affordability report.

The 25 basis points increase in the cash rate to 4.10 per cent will add another $76 a month to a $500,000 mortgage.

For the average Australian mortgage (around $600,000), monthly repayments have risen $1264 since the cash rate was 0.10 per cent in April 2022.

Reserve Bank Governor Philip Lowe has indicated the pain may not be over, flagging more increases in coming months to get inflation under control.

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REIACT CEO Maria Edwards said the proportion of family income needed to meet home loan repayments in the ACT was up from 26.5 per cent in March 2022 to 34.6 per cent in March this year, and there have now been two more rate rises since.

Ms Edwards said there had been a big change in people’s household budgets, and the only saving grace for Canberra was its relatively high incomes.

But the latest interest rate rise, which has come as a shock to some, has made many people nervous and hesitant to commit.

“The impact is really going to be felt in the local market,” she said.

Ms Edwards said all areas of the market would be affected, from first-home buyers struggling to get into the market to landlords wondering whether they can afford to stay in the market.

She said buyers’ borrowing capacity had shrunk over the past couple of years and many first-home buyers were compromising on the type of property they wanted, opting for cheaper apartments over a house.

“They might just go for a unit just to get into the market,” Ms Edwards said.

She said volumes were down and there was not that much to choose from, but buyers were also cautious and picky.

“Buyers are definitely looking for bargains, but if people don’t have to sell, they won’t,” Ms Edwards said.

More first-home buyers were also using the ‘bank of mum and dad’ to get into the market, she added.

bearded man standing outside

Michael Lanscar was keenly aware of interest rate rises when househunting. Photo: Ian Bushnell.

Homebuyer Michael Lanscar was focused on keeping his mortgage to a minimum in light of rising rates, throwing as much as he could at the deposit.

Mr Lanscar said he had just settled on a two-bedroom, two-bathroom, double garage apartment in Denman Prospect and was looking at $2100 in monthly repayments on a $350,000 mortgage before Tuesday.

The prospect of even more rate rises means he will have to watch his budget.

“It’s a little bit concerning. I’m going to have to tighten the pocket and think a little bit more wisely about going out,” Mr Lanscar said.

“I’m going to be spending a lot more nights at home rather than going out for dinners and all that kind of stuff. I’m going to have to pay a lot more attention than I previously would have had to.”

Mr Lanscar was keenly aware of the interest rate environment when house hunting.

“I actually used a mortgage broker and was in contact multiple times a week,” he said.

“He was actually really, really good and was advising me every time that interest rates were going up and what it would mean.”

Ms Edwards said investors were copping it both ways in Canberra with rising rates and costs and falling rents due to the unexpected drop off in interstate migration, bucking the national trend.

“It’s creating a lot of anxiety among investors who are trying to decide whether to hold on to their properties or sell them, so there could be a long-term impact on the rental market if supply falls in available properties,” she said.

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Master Builders ACT CEO Michael Hopkins said the rate rise would only further dampen ACT building approvals which fell 16 per cent over the March quarter and were now down 14.4 per cent over the year to March.

Mr Hopkins said that while there was still strong demand from buyers to sign building contracts and purchase land, indications were not good for the future.

He said the high cost of borrowing meant fewer inquiries at display villages and the industry was worried about how low housing approvals had dropped.

“And this is coming at a time when the ACT needs more housing, much more housing, especially if we’re going to achieve our share of the national housing accord’s one million homes over five years,” Mr Hopkins said.

He said there had not yet been a big increase in businesses going broke in the ACT like there had been interstate, but they were enduring the toughest trading conditions in a long time.

“We have been expecting that number to increase because there has been incredible pressure on building businesses, most of which are small local family businesses, but we’ve been fortunate in the ACT not to see the high number in other states.”

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Give every dole bludger an extra $40 a fortnight and this is the result. When the government has to assure us the budget is not inflationary you know it absolutely is!

Sadly many foreigners are buying up houses here, so Australian interest rate rises make no difference to them. House prices will not drop because of this and so raising interest rates makes little difference. Housing should be for Australian citizens. Time for the government to stop foreigners buying houses here and put Australians first.

“A survey found a clear majority of Australians (82 per cent) felt foreign buyers from China pushed up Australian housing prices. Around seven in 10 Australians (69 per cent) also said Chinese investors in Australian real estate had made it difficult for first home buyers in Australia to enter the market.

But the reality is that foreign buyers only account for around 1 per cent of total transactions in the Aussie property market and 4.6 per cent of new development purchases, so their impact is limited.”

So you are in the very high majority of Australians who have no idea what they are talking about.

devils_advocate9:56 am 09 Jun 23

Yes – the foreign acquisitions and takeovers act prohibits foreigners buying established residential property, and enforcement was ramped up in 2012.

In addition foreign buyers provide critical mass for large-scale new developments which adds to supply, constraining price rises relative to what they would otherwise be.

So foreign investors actually help housing affordability.

HiddenDragon7:32 pm 08 Jun 23

Lots of pigeons coming home to roost now – made all the worse by a couple of decades of using just about every instrument of public policy to turn Australian housing into a giant casino/get-rich-quick(ish) scheme with the result that even people with truly modest housing ambitions are servicing mortgages which are somewhat higher multiples of household income than in earlier times.

A partial alternative to 12 interest rate rises in quick succession would have been very much tougher and faster action by federal, state and territory governments to wind back spending after the official end of the pandemic – but that could have meant a much unhappier outcome for many Canberrans. On this point, and contrary to the constant misrepresentations, Philip Lowe acknowledged in a parliamentary hearing that the recent federal budget was mildly expansionary and thus did contribute to the inflation that the RBA is trying to deal with.

Just wait until you see the cost of the Federal Government’s economy-destroying “Net Zero” ambitions. Hint: it’s actually not about “saving” the environment…

Bob the impala7:12 pm 08 Jun 23

Really, Bill? Oh, do tell, what’s their secret plan?

And what does your comment have to do with mortgage stress after interest rate rises?

Firstly it’s not homeowners who are feeling the pinch it’s mortgagees. You don’t own the home until it’s paid off, the mortgagor does.

Secondly why are these banks not passing the interest rate rises on to those with money IN the bank? Corporate greed.

One of the problems is that the economy is rated on how much company profit is made not how well the average worker and tax payer is doing.

Peter Herman12:02 pm 08 Jun 23

I don’t know why people are blaming the government
How about blaming corporate companies, who want to satisfy their shareholders and also want to make BIG profits at the Cornes of the voter
Corporate companies such as West farmers and also Woolworths are only worried about making BIG profits so as to satisfy their share holders.They don’t care about shoppers,as long as they make hess as Ps of money
Also look at the voters who iwn many homes who have rented these places out…high interest rates mean high rents, so blame both home owners who rent out their many homes and also corporate companies who wish to make BIG profits
I notice that a ‘staple diet’ for the family….cooked chickens…Woolworths gut theirs up from $7:00 to $12:00…..coles put theirs up from $10:00 to $11:50…why, cos they want to make bigger profits
It’s time that corporate companies and also the RBA pulled their heads in
Think about it people
I know that companies are in business to make a profit, but why make a profit this way
Time for corporate companies and the RVA and also some home owners to just ‘pull their heads in’

They have listened to you and filed it away in the shredder

…because the increases in food prices apparently has nothing to do with the additional taxes the Federal Government has added to producers of food. And then increasing the cost of producing food in turn apparently has no effect on inflation. No, apparently it’s just corporate greed to want to keep your business viable.

This whole rate rising to curb inflation seems more and more flawed. It disproportionally affects homeowners and businesses with mortgages. With investors successfully passing the increases on to renters due to a tight market leaving the, generally, low income earning part of the population “pay” and suffer in an attempt to kerb inflation. This is the part of the population that benefitted the least from the prior years of low inflation and stagnant wages.
This especially with big business earning bumper profits, apparently not being considered to be inflationary. So all in all passive income earners such as shareholders and invesyors are still make a killing, and are minimally affected by all the rba’s measures

John Schwazer8:32 pm 07 Jun 23

This should not be surprising. The government is meant to be there for the people. But when it’s there for the technocrats and globalists first, followed by every minority under the sun, as well as too many migrants, why should we be shocked when everything our anti-australia leaders touch turns to crap? We have been in a permanent state of emergency now for at least the last 5 – 10 years, and all the consolation we get – as things go from bad to worse – is that a certain kind of story hour will be available to our children at school. Sorry, but this isn’t running the country for the people. It’s doing everything but that. And the sooner people wake up to this, the sooner we might be able to change things. No to Labor, Greens, Libs, Nats and any other fool who’s obsessed with whatever crisis is on the lips of the bought and paid for zeitgeist.

Graeme Church7:30 pm 07 Jun 23

So many people are blaming the Reserve Bank but it has a responsibility to curb the inflationary policies if the Albanese Govenrnent. Alaqnese promisedto finish what Whitlam started and wgen Whitlam was in office the in;ation rate went from 3% to 22% in 3 years. Under Albo the inflation rate has risen from 2:8% to 7% already and he is less than 1/2 way through his term. Put the blame where it lies.

Short memory I see. Pretty sure it wasn’t Albo who handed out billions to companies that didn’t need it.

Shane Vaughan7:04 pm 07 Jun 23

If only the government would encourage investment property owners to sell and cash in their capital gains instead of raising rents. Every rental sold to an owner occupier is one less rental property that is negatively geared. Perhaps even offer CGT discounts if the seller then reinvests in a build to rent scheme. If enough Mum & Dad investors take this option we can de-escalate this run away property market and inflation.

Bob the impala9:20 pm 07 Jun 23

I get your plan, Shane Vaughan. Realise investor capital gains at a further discounted tax rate so they can invest the cash in rental property built by someone else who was going to build it anyway, again.

Capital Retro5:31 pm 07 Jun 23

It’s so long since we had a recession that only half the population knows what it’s like. Same with interest rates.

I recall that in my life I never had the luxury of paying a a mortgage rate below 9% pa so I don’t know why borrowers are stressing about the current rate of 5.5%pa.

Don’t schools teach young people the history of Australian interest rates?

A lot worse to come. The current government seems to be in denial about the failing economy and are focusing on non-essential things like the voice and dropping the ball on energy supply.

Yeah, we’ll be lucky if its just a recession.

Bob the impala9:16 pm 07 Jun 23

Capital Retro, see my response to Acton. The percentage is part of the equation, not separable from price (hence mortgage size) and income. Didn’t your schools teach you anything about finance?

Home loan interest rates are still at a historic low point.
In 1989 rates reached 17%.
As interest rates rise that is a bad thing for borrowers, especially those who borrowed to their income capacity, but a good thing for savers.
Savers have had to tolerate declining, then minimal interest rates for years.
Remember term deposits? Remember savers?


Bob the impala6:29 pm 07 Jun 23

Great news for you, Acton: in 1989 houses cost less in relation to income than they do today. Not only was 17% on a mortgage at the time much the same proportion of nett income as today, but a shift from, say, 13% to 17% then had no greater effect than a shift from 4.6% to 6% now. Or should we look at that the other way around?

Cry me a river.

Avg house cost $170,000
Avg wage $25,584 6.8 times average wage
$1641 month

Avg house cost $1,000,000
Avg wage $70,068 14 times average wage
$4832 month

The two times are very comparable in how much it is hurting. I don’t think you would ever admit that other people could be dealing with struggles like you had to though. You’re too closed minded.


Because of the massive increase in house prices, today’s interest rates mean the proportion of income going to housing is higher than when those interest rates were 17% for a short period of time.

“Savers have had to tolerate declining, then minimal interest rates for years.
Remember term deposits? Remember savers?”

Not really, why should we be worried about people who expect to receive almost totally risk free returns?

Capital Retro8:20 pm 07 Jun 23

There is a called leverage.

More food for thought………………..in 1983 marginal tax rates across the board were a lot higher than they are now. Interest rates climbed steadily till 89/90 and home ownership was but a dream for most. The late 80’s was not an easy time to buy a house.

During the “Recession we had to have” in 1993; the economy stalled and house prices literally crashed overnight by between 15% & 20% across the board. I am pretty sure that 1992 would have been one of the worst times to buy a first home and 93 / 94 was the worst time ever to sell or refinance.

On the other hand in the late 90’s / early 2000’s, the economy bounced back aND Personal income tax rates were lowered – house prices were more reasonable and hence it was one of the best times to buy a house.

Over the last few years the (tough) high cost to buy a house has only been off-set a little bit buy by lower interest rates. Between 2010 – 2019 was not an easy time to buy a house. If you did it was tough but ……….at least it went up a fair bit in value.

Is history repeating itself?

Are we already on the edge of a recession?

As a boomer, I worked hard and paid off the mortgage

Bob the impala6:25 pm 07 Jun 23

Good on you.

I take it that no pre-boomer nor post-boomer has ever done or could ever do the same.

That is the point of your post, isn’t it, your own virtue?.

That is the point of your post, isn’t it, your own virtue? Not at all. Unlike lefties, I did it without one red cent in benefits from the government

Bob the impala4:55 pm 08 Jun 23

Tough luck, Futureproof, your attempted inversion made no sense but at least you are trying.

You say you own a home without one red cent from the government. Whose mortgage does the government pay, other than those with negatively geared investment properties?

Although, if you never benefitted from society’s coin, government funding, then I take it you are wholly uneducated for starters, never went to a school. Plausible?

The economic damage caused by lockdowns was predicted, and this is just getting started. Wait until bad commercial loans start coming due in the United States for it to really get bad. In the end, government will have caused more harm and death than the virus ever could have managed.

Bob the impala9:22 am 08 Jun 23

TheSilver pops out now and then to say this sort of thing, then pops off again. Apparently, his singular notion of cause and effect keeps him happy. Reality wandered elsewhere a while ago.

As soon as people are held accountable for the biggest policy disaster since the second world war, I’ll care about something else.

Bon the impala – Keynesian economics doesn’t work

Bob the impala4:50 pm 08 Jun 23

It’s lovely to know that is what you think, Futureproof, but what on earth does it have to do with my observation on TheSilver’s one-track one-topic unreal posting? He’ll be waiting a long time.

I accept that. I also realise that we’ll be dealing with the consequences of what was done by government for generations. The worst of the consequences haven’t even presented themselves yet. The number of people I could point to in my age group who got out of the habit of exercising is a health time bomb for 20 years time. Then wait until the current generation of children comes of age with the mental harm imposed on them. The economic issues, the worst of which haven’t yet come through the system, is going to be peanuts in comparison to the other kinds of harm we’ll still be dealing with in 25 years.

I know from FOI requests the ACT government, at least, didn’t even consider any negative consequences before enforcing lockdowns. It’s also personal to me, as the government’s actions directly led to the death of a relative (which, incidentally, is why I haven’t had time to post for long periods, although I am, by nature, more of a lurker). Caring about any other issue seems small and pointless in comparison. Anything minor I can do to make sure a similar catastrophe isn’t borne again on our children next time seems like time well spent to me. It won’t even be close; Government will have caused more deaths and real harm than the virus ever could have hoped to when all is said and done.

None of which isn’t to say this virus wasn’t bad. But, it was obvious early in 2020 there was no driving it to extinction. Every human is now going to be exposed to it multiple times over their lives until the end of time. (That could only have been avoided before government funded research forcibly evolved it to jump the species barrier.) I also don’t believe safety should trump liberty as a general rule. There are far too many benefits to a meaningful life that unthinking safetyism destroys to think this was the obvious choice that government presented it as. The illusion of control that the technocrats that infest our governments believe they have is the root of most of our current problems. Too much rationalism, not enough wisdom.

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