ABS Data: First Home Buyers Vanishing From Market Amid Mortgage Rises

Despite falling house prices, new data shows Australians are forgoing buying their first home thanks to the rising cost of servicing loans.

Amid the fastest cash rate rise since 1994, which experts expect to rise again on Tuesday, the Australian Bureau of Statistics has released data showing demand for home loans is falling rapidly.

“Interest rates are rising rapidly and much sooner than people expected,” Cameron Kusher, Director of Economic Research at PropTrack, told news.com.au.

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“As a result, people just can’t borrow as much as they used to, they just can’t afford to pay top dollar for these properties.”

In fact, ABS reported that the number of first home loans in July had fallen 10.7 percent, a 36 percent drop from this time last year. It also means that the demand has fallen below the pre-pandemic of February 2020.

“While interest rates are up 1.75% year to date, people have really only felt the effects of 0.75% of that,” Kusher continued.

“It may be several months before it really starts to affect your mortgage payment, and we expect interest rates to rise even higher.”

Lowering house prices

While the rising cash rate is driving up interest rates, home prices are actually going down; in many suburbs of New South Wales and Victoria, they are even dipping back to pre-pandemic levels.

However, as we can see, it’s not something to get excited about just yet.

“Increasing interest rates mean paying your mortgage is more expensive,” Kusher said.

“So while the dollar value of what you pay is lower, what you actually have to pay on that mortgage is higher.

“Obviously lower prices, on paper, look good and appear to be improving housing affordability, but the effect of higher interest rates largely offsets those price declines.”

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