In Sydney’s west, principal agent of Laing and Simmons Merrylands George Lattouf said vendors were already being forced to meet the market as buyers’ budgets were slashed.
One client who had listed a home in the Parramatta CBD after the Federal election in May was offered $2.05 million at auction, which they rejected. The home recently sold for $1.83 million.
“They’ve lost around $220,000 in seven weeks,” Lattouf said. “Vendors just need to accept what buyers are willing to pay.”
Though house prices were falling in some pockets of Parramatta, rents were on the rise, making buying a home more attractive for those who qualified for a mortgage. Some rents were as high as monthly mortgage repayments, Lattouf said.
“The market has dropped slightly in the Parramatta district, but rents are soaring. Landlords are saying now we can increase the rent after two years of COVID,” he said.
In Melbourne, Wheatley Finance director and mortgage broker Andrew Wheatley said new first home buyers weren’t noticing the changes, but those who had already been pre-approved for a loan or were returning to the market were more aware.
Home buyers could have their budgets slashed by more, with more interest rate rises predicted.Credit:Rhett Wyman
“What has been very annoying is that clients get pre-approval for 90 days to buy and then when they are re-assessed they qualify for much less,” Wheatley said.
If pre-approved buyers find a property and want to make an offer, they may not be able to afford to do so.
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“People setting their sights on a certain type of property even three months ago, have had to readjust what they’re looking at,” he said.
Wheatley said agents are also more willing to entertain an offer subject to finance, as buyers thinned out and property prices started to fall, something they were less willing to do before interest rates rose.
Though mortgage sizes have already taken a hit, it could get worse, after the US Federal Reserve lifted rates by 0.75 percentage points last week – the third time this year they have increased by that amount.
Some commentators have suggested Australia will follow suit in lifting rates to a high level to try and curb the rising cost of living. Some economists predict interest rates will reach 3.35 per cent by next year.
Westpac’s chief economist Bill Evans recently predicted another 0.5 per cent rise in interest rates in October, while the Commonwealth Bank’s head of Australian economics Gareth Aird believes there will be a 0.25 per cent increase in October and another in November.
With more interest rate rises on the horizon, Canstar’s editor at large and finance commentator Effie Zahos said people needed to take a close look at their spending before applying for a mortgage.
“I think if you are going to get a home loan now, have a good look at your digital footprint and see where your money is going,” Zahos said. “Get rid of your credit cards if you can and get rid of any ‘buy now, pay laters’ – put yourself in the best possible position.
“Because a credit card with a $10,000 limit can reduce any loan you’re looking to get by $50,000.”
