RBA Rate Hikes Threaten Home Ownership for Thousands

The Reserve Bank of Australia's (RBA) interest rate increases may be having a more significant impact on home ownership than previously thought, according to new research.

A study by James Graham, a senior lecturer in economics at the University of Sydney, and Avish Sharma, a PhD candidate at Northwestern University, found that each standard 0.25 percentage point interest rate increase could be locking close to 30,000 households out of home ownership for more than a decade.

The research used a large-scale model to analyse monetary policy and found that buying remained lower for up to two years after a rate increase, with the fall in housing purchases translating to a 0.1 percentage point decline in the home ownership rate within weeks of the rate rise.

This translates to a significant number of households being locked out of home ownership, as the current home ownership rate sits at around 66%.