Australia’s richest people are the most worried about soaring interest rates despite not having to be concerned about paying a mortgage.
This was according to a Westpac-Melbourne Institute consumer sentiment survey for July, which showed that those who owned their own home outright were the most worried about rate rises to combat surging inflation.
When asked about house prices, Australians who owned their home outright gave a score of 78.9 in July – that was a 16.8% drop from the previous month, Daily Mail Australia reported.
Any reading below 100 indicated that there were more pessimists than optimists.
The survey of 1,200 people showed that house price expectations across all income groups were still in the positive zone, with a score of 104.9 points.
Bill Evans, Westpac chief economist, said those who owned their own home were more focused on the prospect of home price falls.
“Perhaps these experienced homeowners, who have seen cycles in the past, are more attuned to the damage sharp increases in interest rates can have on housing markets,” he told the publication.
The Commonwealth Bank predicted an 18% plunge in home prices in Sydney and Melbourne over the next two years. Australia’s biggest home lender expects Sydney home prices to fall by 11% this year, followed by a further 7% drop in 2023 as interest rates climb.
Sydney’s median house price of $1.382 million in June wasn’t that much different from the $1.374 million level in December, with four straight months of decline unwinding gains at the start of 2022, CoreLogic data showed.
Should CBA’s prediction come true, Sydney’s mid-point house price would decrease by $151,247 in 2022, to $1.2234 million, before a further drop of $85,660, to $1.138 million, Daily Mail Australia said.
Meanwhile, Melbourne’s median house price in June was $975,850 – slightly lower than the $997,928 level of December.
With the Commonwealth Bank forecasting a 10% fall in Melbourne in 2022 followed by a further 8% decline in 2023, the mid-point house price in the capital city of Victoria could drop by $99,792 to $898,135 this year and decrease by another $71,851 next year to $826,284.
Home borrowers have copped 1.25 percentage points worth of rate increases since May – the steepest rise over three consecutive months since late 1994.
“The cash rate has increased at a faster pace than we have seen in any cycle since 1994 and this is clearly unsettling for consumers also facing a sharp rise in the cost-of-living,” Evans said.
Westpac now expects the Reserve Bank to lift the cash rate by another 0.5 percentage points in August – a move that that would take the OCR to a six-year high of 1.85%, Daily Mail Australia reported.
