What the RBA interest rate rise decision means for Canberra house prices

The central bank increased the cash rate from 0.10 per cent to 0.35 per cent, marking the first rate rise since November 2010.

After selling the Gordon home they purchased in 2020, husband and wife Jalal Massadi and Hiam Souweid recently put an offer on their "dream house" in neighbouring Conder.

The couple said they weren't overly concerned about the interest rate rise as it's something they had been planning for.

"Interest rates do play a big part in affordability ... I guess for a lot of families the interest rates going up would be a bit of a concern but for us, we're still young, we're both working," Mr Massadi said.

"In terms of buying our dream house [an interest rate rise] wasn't a factor that affected us [because we are] staying in the market."

Ms Souweid said planning for an interest rate rise has helped to ease some of the worry.

"Don't get us wrong ... it is still playing on our mind," she said.

CoreLogic research director Tim Lawless said property price growth is likely to lose momentum as a result of the rate rise.

"Higher interest rates are set to add to the downwards pressure on housing growth rates, which were already losing steam or, as in the case of Sydney and Melbourne, trending into negative territory due to factors including affordability constraints, higher fixed term mortgage rates and lower levels of consumer sentiment," he said.

Analysis from Finder shows someone with a $600,000 home loan could pay an extra $74 per month on their mortgage repayments if their variable interest rate was to rise from 2.1 per cent to 2.35 per cent.

Mr Lawless said mortgage distress should be minimised by mortgage serviceability assessments.

"All borrowers would have been assessed to repay their mortgage under a scenario of mortgage rates being 2.5 percentage points higher than the origination rate and since October last year, borrowers were being assessed at mortgage rates of 3 percentage points higher," he said.

The recent rise in fixed term mortgage lending may also temporarily shield some borrowers from rate hikes, while a tight labour market may act as a buffer, he said.

"Such a low unemployment rate, along with an expectation for higher income growth, should keep mortgage distress and forced sales at relatively low levels," Mr Lawless said.

Luton Properties Tuggeranong real estate agent Kelsey White is helping Mr Massadi and Ms Souweid upsize into a new home. She said Canberra buyers have been preparing for a rate rise for some time.

"We're certainly hearing from buyers that it is something they are factoring in and they're making sure they're not overcommitting," she said.

"Also in the conversations that they're having with their lenders, they're certainly taking into account the serviceability of the loans during the assessment process."

While it's unclear what impact the rate rise will have on the Canberra market, Ms White said there are already some signs of a changing market.

"We're finding that there's still really quality buyers in the market, it's just the number through the doors [at open homes] isn't where it was maybe six months ago," she said.

"I think a lot of banks are telling buyers to seek out a longer settlement. As opposed to what used to be your standard 30-day settlement, buyers are really aiming for 45 to 60 days because the process is just taking a little bit longer."

RATE RISES ON THE AGENDA:

Despite some uncertainty ahead, Jalal Massadi and Hiam Souweid still feel confident in their decision to upsize.

"Initially when we bought in Gordon, our plan was to live in the house for around five years just to sort of build equity and get a bit more savings to buy a bigger house, but [we saw] how the market was going and that it is sort of a seller's market," Ms Souweid said.

"It's a very strong market, so it was definitely a driving factor for us to make the decision to sell," Mr Massadi said.

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