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The Reserve Bank has lifted the official cash rate by 25 basis points to 3.50 per cent - a move anticipated by more than half of the industry.
The rate hike is the second 25 basis point increase in as many months, after the Reserve Bank decided to raise rates last month for the first time since March 2008.
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The rate rise comes as no surprise, with more than 56 per cent of brokers predicting the increase.
According to Mortgage Business’ most recent weekly straw poll, 56.8 per cent of brokers thought the bank would move the official cash rate by 25 basis points.
Of the 544 respondents, 27.4 per cent thought the Reserve Bank may slap Australians with a 50 basis point or more increase, while 15.8 per cent though the rate would remain stagnate at 3.25 per cent.
RP Data’s head of property research Tim Lawless told Mortgage Business that the rising mortgage rate would have a dampening effect on the market, particularly in the mortgage belts of Australia’s capital cities.
“First home buyer demand is already winding back, as evidenced by the number of housing finance commitments which fell for first home buyers by 23 per cent in August,” Mr Lawless said.
“The rise in rates is likely to hit the price sensitive segments of the market the hardest. First home buyers and low income households will feel the rise the most, whereas less price sensitive mortgage holders and prospective buyers will be less affected. In fact, investors are probably welcoming the rise in the mortgage rates as it means less competition in the market place.”
Mr Lawless said the twenty five basis point rise from the Reserve Bank would take the average variable rate up to 6.3 per cent, well below the recent peak when mortgage rates were 9.6 per cent in July and August last year.
