Interest Rate Rise Costs Young Aussies Tens of Thousands of Homes

Research by University of Sydney economist Dr James Graham has found that a single interest rate rise from the Reserve Bank of Australia can have far-reaching effects on home ownership, particularly for young Australians.

The study analyzed housing statistics and used a large-scale model to examine how monetary policy affects Australians' ability to buy and own homes over time. According to Dr Graham, an immediate 5% decline in home purchases occurs following a standard 0.25 percentage point increase in interest rates, with buying remaining low for up to two years.

Home ownership rates also fall after a rate rise, declining by 0.1 percentage points within the quarter and continuing to fall for four years before reaching their lowest point at 0.3 percentage points below baseline. This equates to tens of thousands fewer Australian households owning their home.

The study found that younger Australians are disproportionately affected by interest rate rises, with incomes typically falling and households forced to draw down savings that would otherwise have gone towards a house deposit. As a result, future home ownership becomes more difficult for these households.