Mortgage holders are facing uncertainty as Commonwealth Bank forecasts a substantial correction in Australian house prices, driven by the impact of rising interest rates. The bank's economists predict a potential nine percent decline in national home values, with an average fall of around ten percent expected in capital cities.
Senior economist Trent Saunders noted that the market adjustment over the past three months has been more rapid and widespread than anticipated. Sydney and Melbourne are identified as the weakest markets, with Sydney dwelling prices already down 7.1 percent from their February peak. Melbourne prices have fallen 6.5 percent below their previous high.
The bank's research, analyzed by financial comparison site Canstar, suggests that median property prices across capital cities could decrease by $89,000 to $211,000. Commonwealth Bank specifically forecasts that Sydney house prices could drop 13 percent from peak to trough, erasing approximately $211,000 from the median value.
Canstar's data insights director Sally Tindall described this potential loss as "no longer spare change" and a significant blow to homeowners' equity. Melbourne is projected to experience a 12 percent drop, equivalent to $119,000. Brisbane, Perth, and Adelaide are also expected to see notable declines, with Brisbane's median price predicted to fall by eight percent, or $97,000. Both Perth and Adelaide median prices could fall below the $1 million mark, to $991,000 and $931,000 respectively.
These forecasts come amid expectations of further interest rate hikes by the Reserve Bank of Australia before the end of the year. Commonwealth Bank anticipates a 0.25 percentage point increase in November, bringing the cash rate to 4.60 percent. This would result in an additional $92 per month in mortgage repayments, adding to the approximately $364 monthly increase homeowners have already experienced this year. National Australia Bank offers a more pessimistic outlook, suggesting consecutive rate rises could push the cash rate to 4.85 percent, potentially increasing repayments on a standard $600,000 home loan by an extra $183 per month.
Homeowners concerned about their financial situation are advised by Tindall to review their savings accounts, noting that some banks may be reducing base interest rates while maintaining higher advertised bonus rates.