The hike in the cash rates by Reserve Bank of Australia is likely to have a devastating impact on the low and middle income households, according to the Australian Housing Industry Association.
The Reserve Bank of Australia has raised the official cash rate by 0.25% to 6.75%, with the mortgage rates predicted to follow soon, according to news published by SMH.
As per the Australia’s Housing Industry Association (HRA), the young and prospective home owners are likely to experience heavy pressure on their budgets following the rate hike. The recent rate increase, the sixth from the time of last election held in December 2004, has the power to influence the community on broader terms.
The consequence of four rate hikes has been dreadful on the already increased household budgets of numerous families, and the Mortgage Assistance Plan (MAP) will give important financial solution and support to the families trapped in the mortgage debt.
The increase is likely to affect most those who are looking to buy a home. The rate increase occurs at a crucial occasion when several businesses, especially in tourism and manufacturing, are already experiencing weak demand, owing to the negative impact of the currency shock on their earnings and competitiveness.
The growing demand for the rental property has led to increase in rents which are in turn compelling the low income group to settle for pitiable quality housing facilities. This is shocking news for the lower and middle income families who are under immense pressure with record soaring house prices and escalating rents. And it does indicate a strong need for a national housing plan.
John Edwards, Chief Economist at HSBC, stated that considering the power of the increase, in addition to the tenacity of the moderately elevated core inflation and growing labor market anxiety, at least another tightening is anticipated, possibly in March 2008, with further odds thereafter, according to news published by TheWest.
A Senior Research Analyst at RNCOS says, “The Australian Housing industry is being hit by the incessant increase in the interest rates, which reflects the fall in the moral of housing traders. To provide a solution to this crisis, the government should push the state-based land release programs to make sure abundant green-field and redevelopment land delivery is available to fulfill the demand requirements to meet the affordability objectives. The efficiency of the existing mechanisms and programs to offer reasonable housing to lower income and underprivileged households also needs to be properly reviewed”.
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