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Rising home loan rates to take some of the heat out of property market


Demand for mortgages is expected to slow as Australia’s housing price boom comes off the boil.

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House prices – as measured by CoreLogic – rose by just one per cent in December, the slowest pace in almost a year, although over 2021 they were still up more than 20 per cent nationally.

Affordability constraints and rising fixed mortgage interest rates are seen as reasons for this slowdown.

In October the banking regulator also tightened rules when applying for a loan, to ensure prospective home buyers can pay the mortgage when interest rates inevitably start rising on variable rate loans.

At its quarterly meeting in December, the Council of Financial Regulators thought it was too early to assess the impact of raising the serviceability buffer to three percentage points above the loan product rate being applied, from 2.5 percentage points previously.

However, they continue to keep a watchful eye on developments in housing market more broadly.

The Australian Bureau of Statistics will release lending figures for November on Friday.

Economists at AMP Capital expect loans for housing to have risen two per cent in November.

In October, housing loan demand from investors neared the record high set in April 2015 after rising for 12 consecutive months.

In contrast, loans for first-time buyers fell for a ninth month in a row and were 16 per cent lower for the year.

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