Further interest rate rises for property loans could exacerbate an economic slowdown.
Laing+Simmons Managing Director Leanne Pilkington says the Reserve Bank's decision to leave rates on hold was "prudent" and "widely expected", but moves by the major banks to lift rates is "concerning".
Pilkington said the Reserve Bank's expectation of weaker economic growth means a rate hike is likely to be some time off.
“While it appears the next rate movement will be up, subdued economic growth at the moment means an increase should be some time away yet,” she said.
Pilkington said the banks' next moves will be closely watched.
“The attention of buyers and mortgage holders shifts to the banks now," she said.
“Though the increases (in interest rates by the major banks) mainly impact investors, the rate adjustments announced by NAB and Westpac this week reinforce the willingness of the major banks to not necessarily operate in line with the RBA," she said.
Pilkington indicated that higher rates could be damaging.
“While the fundamentals for property remain strong, affordability remains an issue for the market, especially for first home buyers. In an environment of subdued economic growth, it’s imperative to provide greater, not less, support for this segment,” Pilkington said.
Housing Industry Association Senior Economist, Shane Garrett, said higher interest rates could accentuate any economic slowdown.
"Unfortunately for home buyers, some of Australia’s mortgage lenders have moved to increase their mortgage interest rates over recent weeks,” said Garrett.
“By hitting investors with higher rates, the banks risk exacerbating the slowdown in residential construction that is already underway,” cautioned Garrett.
Garret said interst rates are likely to head higher in the US this month, which means "there is a strong possibility that the era of RBA interest rate cuts is at an end."
REINSW President John Cunningham said speculation is mounting the Reserve Bank will lift interest rates in the new year.
“There are strong signs that interest rates will go up in 2017 after a downward trend for more than five years,” Cunningham said.
"The reality is that record interest rates will not last forever," he said.
He said the recent rises in fixed interest rates are a strong indicator the trend has turned.
"We warn those planning to enter the property market with a mortgage to factor in the possibility of future interest rate rises,” he said.
See also:
Big four banks lift mortgage interest rates
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OECD says Australia must lift interest rates to cool housing market