The decision by the Reserve Bank of Australia (RBA) to increase the cash rate by 25 basis points to 4.25 per cent today was not entirely unexpected, after comments from RBA Governor Glenn Stevens last week and increases in key export prices.
REIQ Chairman Pamela Bennett said while the Reserve has indicated a gradual process of increases, today's rise being the fifth in just 7 months, gives uncertainty as to how high interest rates may go this year.
"With the winding back of the first home owner boost, sales numbers in the sub $500k bracket declined 22% over the December quarter 09 - with first home buyers now back to normal levels currently representing 17% of the market. The market has already started to adjust itself accordingly." Ms Bennett said.
"Further interest rate rises by the central bank will push first home buyers further out of the market and no doubt impact on the investor and upgrader market as well, as loan repayments become more expensive."
"Homeowners need to be prepared for further increases during 2010 and ensure they are adjusting their budgets accordingly to eliminate any risk of mortgage stress."
