Today’s decision by the Reserve Bank of Australia will add $11,000 in interest payments to the average home loan taken out over 25 years, according to Real Estate Institute of Australia President Tony Brasier.

‘Homebuyers should always factor into their budgets the possibility of interest rate rises, but today’s announcement comes at a bad time for Australian families, who are already feeling the pinch at the petrol bowser,’ says Tony Brasier.

‘The 0.25% interest rate rise will push average monthly loan repayments up $36 to $1658, adding $11,000 over the life of a 25 year loan,’ says Tony Brasier.

This is based on the March quarter 2006 average Australian home loan of $225,602. The Australian median house price was $394,431 for the March quarter.

‘Housing affordability is already very poor, and is aggravated by State governments which continue to tax housing heavily through stamp duty and land tax. Home buyers across Australia pay from around $3,840 in Queensland, up to more than $18,000 in NSW, on property taxes on a median priced home. This adds between 3 to 5% to the median house price.

‘Even with stamp duty concessions for first home buyers in some States, the picture is gloomy. First home buyers have to factor in from $2,040 for stamp duty on a median priced home in Queensland, up to a massive $17,200 in Victoria.

‘The housing market is very patchy at the moment. On the one hand, Western Australians are seeing house prices rise dramatically, and on the other hand, those in New South Wales who have borrowed large sums to finance their homes are in some cases seeing the value of their homes go backwards. The market in other areas of Australia is more stable, although it may be negatively impacted by this latest rise.

‘The picture presented by official housing data can be confusing because of the lag time between consumer decisions and the final settlement on property purchases. Interest rates are a major consideration for consumers entering or upgrading in the housing market. The impact of changes in interest rates can take several months to filter through in official figures.

‘Stable interest rates have been a very positive factor for Australian homebuyers, helping them enter the market both as first home owners, and as investors seeking to self-fund their retirement. Today’s decision is a blow for those seeking to enter the market in particular. In May, first home buyer commitments fell to 17.4% of total commitments, down significantly from the long-term historical average of 21.8% from June 1991 to June 2002 when median house prices began to escalate. The REIA urges the Reserve Bank to move very cautiously in coming months as it makes further determinations about interest rates,’ says Tony Brasier.