Westpac and ANZ economists predict the policy rate will peak at 3.35 percent, up from 1.85 percent today.
The research revealed that a significant number of Australian mortgage holders are primed for mortgage anxiety.
Nearly three in 10 borrowers surveyed said they didn’t consider the cash rate to increase at all when budgeting for a home loan, despite having to account for it in their home loan appraisals.
And four in ten only budgeted for the impact of a cash rate of 3 percent or less.
While economists at Westpac and ANZ forecast the cash rate to move above 3 percent, analysts at Commonwealth Bank and NAB share a more optimistic outlook, anticipating a level between 2.5 and 3 percent.
“The real specter of mortgage stress is when people start losing their jobs,” property economist Dr Andrew Wilson told 9news.com.au.
“That’s what we have to watch out for.
“But… we don’t really have that chance for the foreseeable future.”
“It’s been a year of correction in our capital city’s housing market,” Wilson said, but added that the turmoil was “not a surprise” after years of booming home prices.
While some were forecasting house prices in Sydney and Melbourne to fall as much as 15 per cent, Wilson said he was not convinced.
“There are a number of factors that may mean this phase of correction will be shallower than many expect,” he said.
The market in Australia’s two most populous cities could bottom out by the end of the year, he said.
“There is no doubt that this is the hangover after the party.”
The real problem now, he said, was trust.
“In general, we are a short supply market in all of our capital cities.
“There aren’t enough houses to meet the demand, and all you have to do is look at the rental market to see that.”
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The first rate hikes in years, and the prospect of more, have sidelined buyers and sellers, he said.
“They’re waiting to see how it all pans out.”
The next RBA decision is scheduled for September 6.