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Through November, higher than expected inflation figures reversed expectations of further interest rate cuts, and the Australian Prudential Regulation Authority said it would tighten bank lending standards largely for investors.
Lawless said the combination of these two factors suggests that price growth through 2026 would be lower than expected.
“With housing affordability already stretched and worsening, it stands to reason that fewer borrowers will be able to access credit, as serviceability barriers become more prominent,” he said.
The fastest price growth continues to be in regional areas. Values in the north-west Victorian centre of Mildura have jumped by 18.5 per cent over the past year; Queensland’s Granite Belt has experienced a 19.7 per cent increase; and in the West Australian south-west city of Albany, they have soared by 22.6 per cent.
The Reserve Bank monetary policy committee meets next week for the last time this year. Economists and financial markets do not expect any change in interest rates.
The Reserve Bank is not expected to use its last meeting of the year to change interest rate settings.Credit: AFR
Since February, the bank has sliced the cash rate by 0.75 percentage points. On a $600,000 mortgage, the reduction has cut required monthly repayments by almost $300.
But data from the Reserve suggests more home buyers have not reduced their repayments, being in a strong enough financial position to pay down their mortgage faster.
The interest bill on owner-occupier mortgages reached a peak of more than $20 billion in the June quarter this year, a 166 per cent jump on what was being paid in early 2022 when official interest rates were just 0.1 per cent.
But for the first time since 2022, the amount of interest charged on owner-occupiers has fallen, edging down $700 million in the September quarter to $19.3 billion.
The drop in interest payments, plus growth in wages, contributed towards a sharp lift in extra repayments being made on home loans by the nation’s borrowers.
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In the September quarter, these “excess” payments jumped by almost a third to $14.1 billion. Apart from two quarters during the pandemic, when many households received government payments or accessed their superannuation, it was the largest quarter for extra payments on record.
Over the past year, home buyers have paid an extra $51.6 billion off their mortgages, an all-time high.
Those higher repayments would normally point to a slowdown in consumer spending, which will be a key part of this week’s national accounts that will be released on Wednesday.
But consumer spending is tipped to lift by 0.5 per cent through the September quarter. On top of a lift in new business investment, driven largely by data centres, and a jump in new housing construction, economists expect overall economic growth to have increased over the past three months.
Analysts tip GDP growth to climb beyond 2.1 per cent over the past year, its strongest performance since early 2023.
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