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Price growth is not sustainable, says close to half of experts surveyed. Image – Canva.
  • All 40 participants correctly predicted RBA would keep cash rate on hold
  • 46% label house price growth as 'unsustainable'
  • UBank and Westpac have lifted fixed-term rates over the past week

Finder’s latest RBA Cash Rate Survey has found close to half of experts agree that recent growth in house prices is “unsustainable”.

All 40 participants accurately predicted the Reserve Bank of Australia (RBA) to hold the cash rate at 0.1%. The survey comes as property market saw its fastest growth in 32 years in March, while dwelling values have increased by 6.2% over the past year according to CoreLogic data.

Finders Head of Consumer Research, Graham Cooke, said experts were concerned about an emerging housing bubble, with 46% aguing the growth in prices could not be sustained.

“Rock-bottom rates, government stimulus and a fear of missing out have really lit a fire under the belly of the market. Listing numbers are unable to meet high buyer demand, keeping inventory levels low overall and adding to the sense of urgency among buyers.

“We’ve seen more borrowed for housing over the last six months than during any similar period in history – and economists have tipped us to borrow more over the next six.”

Graham Cooke, Finder’s Head of Consumer Research

Mr Cooke added the panel believes this high level of growth will not continue indefinitely, nor do they expect regulatory intervention, although there is a possibility this could occur in due course.

Mala Raghavan, a Lecturer of Economics at the University of Tasmanian School, has warned that many buyers are putting themselves at risk by acting hastily.

“The recent uptick in buying behaviour largely appears to be due to the fear of missing out, and many buyers are rushing into the market without clear foresight of the impending risks.

“When mortgage rates start rising, many households will risk being unable to service their loans and could be vulnerable to foreclosures.”

Mala Raghavan, Univeristy of Tasmania

While the RBA is unlikely to increase the cash rate in the short term, the experts warn mortgage holders that out-of-cycle rate increases can occur – in fact, it already has.

UBank, for example, increased its 3-year fixed rate from 1.75% to 1.85% with Westpac also bumping up fixed-term rates last week.

The average mortgage in Australia is currently $495,420 according to the RBA.  If the average person saw their interest rate go up 0.25% from the average variable of 4.27% to 4.52%, this would mean an extra $878 per year on mortgage payments.

“The last time the cash rate was held for an extended period of 34 months, banks changed their interest rates on average 7 times – 5 of which were increases.”

Sam Cooke, Finder’s Head of Consumer Research

“It’s important that homeowners factor in potential rate increases when applying for a mortgage – keeping a cushion in your budget can keep your budget from getting dicey down the track,” concluded Mr Cooke.

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