Recent RBA induced mortgage rate increases are unlikely to stop first-home buyers from entering the housing market, with finance-boosting tax cuts helping to cushion the blow, according to analysts.
While last month's rate rise came as a surprise to many, it is not expected to significantly dent the confidence of prospective home buyers, with conditions continuing to prove favourable.Housing finance figures published earlier this week by the Australian Bureau of Statistics (ABS) showed the proportion of all home loans taken out by first home buyers rose to a four-year high of 19.1 per cent in April, from 18.4 per cent in March.
CommSec chief equities economist Craig James said while the latest rate rise would have scared some potential buyers off and caused others to redo their sums, for most it should not have had too much of an impact.
"In May, people would have weighed up the fact that rates have gone up, but there is also a tax cut coming through," he said.
"So in terms of servicing the debt, most probably it would have worked out as pretty much line-ball.
Advertisement:"I think we're going to see first home buyers as a proportion of the market continue to edge a little bit higher, holding in the order of 19 to 20 per cent of the market."In early May, the Reserve Bank of Australia lifted the cash rate by a quarter per cent to 5.75 per cent.
Recent stronger-than-expected data had led to renewed talk of another rate rise this year, but Mr James said potential first-home buyers would again do their sums.
"They'll factor in a quarter per cent rate hike, and provided that's affordable, then clearly their plans won't change," he said.
House prices in most capital cities had flattened out, income levels were rising and the jobs market was strong, meaning improved affordability and access to the housing market, he said.
The Mortgage Industry Association of Australia (MIAA) said the May rate rise was unlikely to have much of an effect on new home buyers when taken in context.
"In some areas of Australia we're seeing the pressure on housing prices dropping a bit, so that's making housing a little bit more affordable," MIAA chief executive Phil Naylor said.
"Especially with those tax cuts brought into the mix, provided people divert that into their mortgages rather than elsewhere, that should counteract any impact of the interest rate increase."
The trend in the proportion of all home loans taken out by first home buyers had been gradually rising in the few months to April and was likely to lift further, Mr Naylor said.
"It might bounce down a little bit if the impact of the interest rate increase comes in, but we think the trend will still continue upwards over the longer term," he said.
Source: News Corp
