The interest rate hike means higher mortgages for millions of Australians, but there is still a large group that could have consequences.
Tenants across the country should brace for an eventual spike in weekly payments, experts have warned, following the Reserve Bank of Australia’s call to raise official cash rates this week for the first time in 11 years.
Sitting at an all-time low of 0.1 percent, the RBA raised the spot interest rate to 0.35 percent on Tuesday in a bid to cool the economy, pushing the cost of living down a whopping 8.5 percent in the past 12 months. increased.
The rise in cash rates means mortgage holders will see their repayments rise – an amount that, according to Jo Natoli, principal and licensee of The Rental Specialists and board member of the Real Estate Institute of NSW, will ultimately be passed on to tenants living in investment properties.
“There will be some owners who are going to look at the costs associated with keeping their property and I think this means we will see rent increases in the market,” she warned.
“However, there are a lot of factors at play here – it’s not just the interest rate hike – you also have… activity of people entering the country and taking up property.
“The Sydney market in particular will be affected, I think.”
However, Ms. Natoli noted that a $50 increase in weekly mortgage payments would not necessarily translate immediately into a weekly rent.
“Owners still need to be able to justify the increase they’re considering — landlords need to match rents to existing market activity,” she said.
Ms Natoli said she believed Australia was moving towards a model more in line with the European market, where long-term letting and strict rental laws are standard practice.
“Long-term renting is becoming more common – it’s no longer that step between living outside the home and buying a home of your own,” she said.
About a third of Australians are currently renting, with rising house prices and declining eviction rates expected to drive up rental housing in the coming years.
However, both Labor and the coalition have made home ownership a central theme for the upcoming elections, with minimal measures for tenants.
The ALP’s “Help To Buy” policy offers middle-incomers the chance to buy a home with a 2 percent down payment, while the coalition’s new home guarantee helps buyers secure a home with a 5 percent down payment.
In addition, the ALP’s $10 billion Housing Australia Future Fund will build 20,000 new social housing units, as well as 10,000 homes for frontline workers such as nurses, police and cleaners.
“The policies announced by the various politicians are leaning towards home ownership – the current legislation is inadequate for both tenants and existing homeowners,” said Ms Natoli.
“The government can do more to help tenants in their search for security in the rental market, but that should not be at the expense of owners who can make commercial decisions.
RBA Governor Philip Lowe warned that consumers can expect further hikes in cash interest rates in the coming months, an ominous sign for homeowners and renters alike.
“The economy has proven to be resilient and inflation has risen faster and at higher levels than expected,” said a statement from Mr Lowe released Tuesday.
“There are also indications that wage growth is picking up. Given this, and the very low level of interest rates, it is appropriate to start the process of normalizing monetary conditions.”
Good news for renters: It’s currently illegal for landlords to raise bills before the end of a fixed lease, or without at least 60 days’ notice for a perpetual lease.
Shane Oliver, chief economist at AMP Capital, added that low rents and existing negative gearing measures could deter some landlords from raising rental bills.
“Some landlords can pass [some of the additional costs associated with interest rate rises] but others may conclude that it is not necessary…because of the benefits of negative gearing,” Oliver told SBS on Tuesday.
He added that while he agreed there would be upward pressure on rents, he personally didn’t think the overall effect on renters would be “too significant.”
Originally published as Expert warns rent will be impacted by RBA cash rate rise