Experts predict rBA will start raising interest rates in August, up to 1.75%!Bank: House prices will fall by 14%

2022-06-22 0 By

Westpac predicts that inflation will force the RESERVE Bank of Australia to raise interest rates in August and house prices will fall 14 percent in 2023 and 2024, the Australian Financial Review reported.Australian house prices rose 22 percent last year, helped by the lowest interest rates on record (0.1 percent).But since January 2022, Australian house prices have risen by only 2%.Westpac chief economist Bill Evans said: “House prices are forecast to fall 7 per cent in 2023 and another 5 per cent in 2024 before gradually stabilising towards the end of the year.””We expect the RBA to start raising rates in August 2022 and move to as high as 1.75% in March 2024.This shift also means that house price corrections will be brought forward and extended into 2024.”Westpac Chief Economist Evans, Commonwealth Bank Head of Australian Economics Gareth Aird, AMP chief economist Shane Oliver and Deutsche Bank’s Phil O&#39, the Australian Financial Review reported.Donoghue both think the RBA will start raising rates in August.Anz bank expects the RBA to raise rates in September, while National Bank forecasts the first rate hike in November, following higher than expected inflation in the fourth quarter.The headline inflation rate was 3.5 per cent in the year to December 31 last year, while the underlying inflation rate was 2.6 per cent, still within the RBA’s target range of 2-3 per cent.”When the RBA keeps inflation within its target range, house prices suffer additional damage because the housing sector is very sensitive to changes in interest rates,” Evans said.”Given the low affordability of Housing prices in Australia, rising interest rates will directly affect buyers’ ability to borrow.”National Australia Bank predicted earlier this year that Sydney-Melbourne house prices would fall 11 per cent by 2023, while AMP predicted a 10 per cent drop.Rba governor Philip Lowe said on Friday the central bank would be patient enough to raise interest rates.This is in sharp contrast to market forecasts that the RBA will raise interest rates five times this year.