Australian banks have begun raising fixed mortgage rates ahead of the Reserve Bank of Australia's next meeting, as global trade tensions and domestic housing policies create uncertainty for first home buyers.
Economists predict the RBA will cut the cash rate to 3.85% at its 19-20 May meeting, with markets pricing in a rate of 2.85% by November. However, RBA Governor Michele Bullock stated last week that it remains 'too early' to judge the impact of Trump's trade war on interest rates.
According to minutes released on Tuesday, RBA board members 'emphasised the need to be cautious and alert to the evolving economic outlook'. The bank has signalled readiness to cut rates if necessary.
Chief economist at the Centre for Independent Studies, Peter Tulip, said a 1 percentage point rate cut could push home prices 6% higher after one year and 8% after two years. Based on CoreLogic's median house price of about $772,000, this would represent rises of roughly $46,000 and $60,000 respectively.
Brendan Coates from the Grattan Institute warned that lower rates, combined with bipartisan policies allowing 5% deposits, could help more people buy homes but leave them with larger mortgages. A Canstar analysis found a single borrower on average full-time wage could borrow an extra $12,000 per rate cut.
