Borrowers in regions with the highest number of mortgaged households might start to feel the impacts of the cash rate, according to a recent analysis by CoreLogic.
CoreLogic head of research Eliza Owen said the impacts of rate hikes could already be manifesting in markets with the highest number of mortgage owner-occupiers, particularly in terms of home values and listings.
“At this stage, most markets with a high volume of owner occupier mortgages do not exhibit capital growth trends that are alarmingly out of step with the national housing market,” she said.
“However, it is noticeable that new listings volumes are climbing in some of these markets, where the national trend is seeing a seasonal slowdown — this could make it more difficult for recent buyers to make a capital gain if they are struggling to meet mortgage repayments.”
CoreLogic identified the 25 SA3 locations based on the 2021 Census that had the highest number of mortgage households.
The list shows how home values and listings performance changed since August 2021, taking into account all the cash-rate hikes from May 2022.
According to the analysis, around 350bps would have been passed through to outstanding variable loans by the end of June.
There has been 400 basis points' worth of rate hikes, with more tipped in July and August.
This means that for someone with a $750,000 mortgage, monthly home loan repayments are now $1,550 higher.
The effect has been slower than anticipated through the wider market as fixed-rate borrowers whose terms are expiring this year are expected to see an even higher jump in their repayments.
The end might not be near, Ms Owen said, as major banks economists reset their forecasts for the terminal cash rate to at least 4.35%.
Many economists say there is risk of going to 4.60% and internal modelling from the RBA says it may have to be 4.80%.
Where are the most mortgaged regions?
|
Regions |
Number of Mortgaged Owner-Occupier Households |
Share in total number of households |
Change in Home Values since August 2021 (%) |
Change in total listings versus five-year average (%) |
|
Wyndham VIC |
43,807 |
47.8% |
1.8 |
-9.6 |
|
Casey - South VIC |
38,614 |
56.2% |
-2.1 |
-22.8 |
|
Wanneroo WA |
38,320 |
54.0% |
8.4 |
-47.0 |
|
Whittlesea Wallan VIC |
37,864 |
45.5% |
-2.6 |
-10.8 |
|
Melton - Bacchus Marsh VIC |
32,079 |
51.9% |
-0.9 |
20.6 |
|
Onkaparinga SA |
29,721 |
43.3% |
29.3 |
-45.6 |
|
Tullamarine - Broadmeadows VIC |
29,215 |
47.6% |
-2.8 |
-12.4 |
|
Stirling WA |
28,908 |
35.0% |
2.8 |
-33.2 |
|
Geelong VIC |
28,002 |
34.6% |
-4.5 |
11.7 |
|
Swan WA |
27,549 |
54.2% |
5.7 |
-45.5 |
|
Yarra Ranges VIC |
26,767 |
48.2% |
-7.8 |
-8.6 |
|
Joondalup WA |
26,348 |
45.6% |
8.2 |
-39.3 |
|
Townsville QLD |
24,988 |
35.7% |
7.5 |
-33.9 |
|
Knox VIC |
23,563 |
41.0% |
-6.9 |
-27.9 |
|
Blacktown - North NSW |
23,343 |
55.5% |
3.4 |
-13.5 |
|
Gosford NSW |
23,223 |
33.9% |
-8.9 |
-24.5 |
|
Rockingham WA |
23,053 |
47.6% |
16.2 |
-48.2 |
|
Campbelltown NSW |
22,996 |
39.9% |
0.8 |
-26.0 |
|
Mornington Peninsula VIC |
22,504 |
34.8% |
-6.5 |
-0.1 |
|
Penrith NSW |
22,330 |
40.7% |
-1.7 |
-27.6 |
|
Newcastle NSW |
22,055 |
31.5% |
2.0 |
-16.8 |
|
Frankston VIC |
21,907 |
41.3% |
-7.1 |
-13.6 |
|
Ormeau - Oxenford QLD |
21,823 |
42.8% |
15.8 |
-42.9 |
|
Wyong NSW |
21,525 |
34.1% |
-4.4 |
-27.0 |
|
Salisbury SA |
20,971 |
40.5% |
33.1 |
-46.1 |
Of the 25 regions in the list, nine are in Greater Melbourne with Wyndham taking the spot as the region with the highest number of owner-occupiers with a mortgage at 43,807.
In terms of proportion of overall households, Casey South in Greater Melbourne had the highest share at 56.2%.
Large regional centres, including Ormeau-Oxenford on the Gold Coast, Geelong, Newcastle, and Townsville are also included in the list.
Ms Owen said trends in home value growth in capital cities are an important consideration in the financial stability of the housing market.
“This is because in the event of a ‘forced sale’, growth in home values allows a seller to come away with some capital gain or allows a mortgagee in possession to recuperate the entirety of debt on a property,” she said.
Across the markets included in the list, capital growth since 2021 has averaged 3.1%, compared to national housing market growth of just 1.0%.
It is important to note, however, that there is a large range in the numbers, with Salisbury recording a 33.1% growth and Gosford registering a slump of 8.9%.
While listings are still low relative to where they have been in the past five year, the monthly median time on market, particularly in regions like Blacktown – North, has been rising since early this year. The escalating interest rates and growing buyer uncertainty may result in a significant build-up of housing inventory.
“As buyer demand wanes amid higher interest costs and seasonal trends, there could be an extended downturn in some of these markets as stock accumulates, such as in Melton – Bacchus March,” Ms Owen said.
“In areas such as Blacktown – North, where values have seen a strong bounce back in the three months to May, as supply creeps up it may put downward pressure on the growth trend in the coming months.”
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