REIQ: Essential costs drive inflation, yet borrowers pay the price

The Real Estate Institute of Queensland (REIQ) says the Reserve Bank of Australia’s (RBA) decision to lift the cash rate by another 25 basis points to 4.1% unfairly punishes borrowers for rising everyday essential costs that are entirely outside of their control.

REIQ CEO Antonia Mercorella said the two rate hikes in as many months is piling on the misery to borrowing households who are already grappling with high housing costs and broader cost-of-living pressures.

“Many households are already feeling the squeeze from rising energy costs and other essentials, so the cumulative impact of back-to-back rate rises will stretch budgets even further,” Ms Mercorella said.

“This decision also comes at a time of heightened global uncertainty, with tensions in the Middle East adding volatility to oil markets.

“The RBA is responding to inflation caused by increases in prices relating to these global issues, such as higher prices at the petrol bowser, but the cash rate remains its only real lever to fight inflation.

“Unfortunately, that lever is a blunt instrument – it affects all borrowers equally, regardless of whether they’ve got high discretionary spending or are simply covering necessities.

“Borrowers can’t change the price of electricity, insurance or fuel, yet they’re the ones copping higher mortgage repayments - and the financial strain is compounding.

“Monetary policy can only go so far. The real issue is what’s holding back productivity and economic growth – challenges that only the Federal Government can address.

“For a borrower with Queensland’s average new owner-occupier loan of around $690,000, today’s increase could add roughly another $105 to monthly repayments.^[1]

“When combined with the February rate rise, that’s an additional mortgage burden of around $200 per month or $2,400 a year.”

Along with hitting hip pockets, the REIQ also warned that the RBA’s move also delivers another blow to aspiring home buyers’ confidence and borrowing capacity.

“A single buyer earning Queensland’s average full-time income of $103,450 could see their borrowing capacity fall by around $14,000, while a dual-income household with children may see a drop in borrowing power by around $27,000,” Ms Mercorella said.^[2]

“Coupled with current tight rental market conditions, that makes it even harder for aspiring home buyers to transition into home ownership at a time when affordability is already stretched.”

ENDS

Media enquiries:  Claire Ryan, REIQ Media Manager, M: 0417 623 723 E: media@reiq.com.au

Read another REIQ media release: The REIQ's sector-specific working groups name new Chairs.

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