Home loan borrowers start to feel the pain of rate rises

It seems the four rate rises in the last six months are starting to have an impact on potential home buyers.

According to data from the Australian Bureau of Statistics (ABS), home loan approvals dropped by 7.9% in January 2010 – the biggest fall since June 2000.

''This marks the fourth consecutive decline in housing finance since the Reserve Bank of Australia commenced tightening monetary policy, suggesting momentum in the property market is fading,'' Moody's Analytics economist Matthew Circosta said.

RP Data’s senior research analyst Cameron Kusher agreed that while the market is currently being fuelled by strong migration and insufficient housing supply, higher interest rates are likely to dampen property value growth.

“Over the next year we anticipate a lower level of growth nationally (anticipated to be single figure) which will be bought on by tighter lending requirements and higher interest rates,” said Mr Kusher.

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