RBA Hikes Cash Rate - Home Loan Marketplace JOUST Reacts

By Carl Hammerschmidt, CEO of Joust.

“Late last week CBA lifted their fixed rate by 0.3% – an early sign that a higher than expected rate hike was on the way. This has indeed transpired, with a 0.5% rise to the cash rate target announced by the RBA today, taking it to 0.85%. Today’s announcement is a clear sign that the RBA has begun the process of tightening and we can expect rates to gradually increase over 2022. Price rises are now considerably evident across our economy, climbing with unprecedented speed unlike anything most Australians have experienced.”

Whilst inflation continues to grow, the RBA is seeking to normalise rates. Within the property market though, we are seeing some cooling. Mortgage lending is decreasing – we are seeing this at Joust and the sentiment is across the market with the AFR reporting home loan commitments are down 6.4%, owner occupiers down by 7.3% and investors down 4.8%.

There is a real price correction in the market and for consumers this is a territory we have not seen in some time. For many borrowers it means they don’t know where they stand. This is equating to a lot of uncertainty in the home loan market. For brokers we are seeing them look at other options such as commercial loans.

For borrowers, this rate rise obviously presents a challenge. Last month Joust released data in collaboration with Digital Finance Analytics (DFA) that found over 40% of Australians with mortgages were already in ‘mortgage stress’, defined by DFA as a household where occupants are either able to pay their mortgage under duress, or are actually behind on their mortgages. Off the back of the 0.25% cash rate rise in May, another 0.25 points would put 143,124 additional Australian households under mortgage stress compared with March. Meanwhile, a 1% rate rise on March levels would see 321,874 additional households under mortgage stress.

But this also creates an opportunity, as lenders are now being forced to compete to get business after such an extended period of low rates. Joust’s Instant Match service allows borrowers to shop around for the best rate on their home loan, and we certainly encourage mortgage holders not to be complacent with their current deal.”