Real Estate Institute of Australia (REIA) president David Airey has criticised the Reserve Bank’s decision to lift interest rates for the third consecutive month.
Mr Airey said the 25 basis point increase was “too much, too soon.”
“We are still in uncertain times and although we did not feel the impact of the global financial crisis like other economies, three rate rises in three months is over the top for Australian families and business owners in the lead up to Christmas,” he said.
According to Mr Airey, the three interest rate hikes are damaging not only to the 200,000 first home buyers that have taken up the chance to buy in this last year, but also to developers, builders and businesses.
“Since economic recovery showed those first green shoots, the REIA has continually warned that despite the early and promising signs, rapid interest rate increases have the potential to dampen the market and stifle recovery,” he said.
“With the variable rate marching back towards 7 per cent, the RBA has used a sledge hammer to crack the inflation nut. Businesses are paying 4 per cent to 6 per cent above the cash rate for credit, a fact continually missed in news headlines which concentrate on home borrowing rates.”
However, not everyone is of the opinion that the rate hike is bad.
RP Data’s research analyst Cameron Kusher told Real Estate Business that while the rate increase would start to impact price sensitive markets such as first home buyers, it was good news for investors.
“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 Kusher said.
“At the end of the day, the 25 basis point rise from the Reserve Bank is likely to take the average variable rate up to 6.55 per cent. This is still well below average levels which tend to be above 7 per cent and significantly lower than the recent peak when mortgage rates were 9.6 per cent in July and August last year.”