THE Reserve Bank of Australia's (RBA) decision to lift interest rates will reduce the chances of a sustained recovery in the building of new homes, the Housing Industry Association (HIA) says.
The RBA today lifted the cash rate by 25 basis points to 4.25 per cent, saying growth and inflation were around trend and it was appropriate for interest rates to be closer to average.
HIA chief economist Harley Dale said there was a risk that a lift in the construction of new homes could run out of steam before the end of 2010.
"The key action to prevent undue upward pressure on existing home values (and rents) is to ensure a sustainable boost to the new housing stock, because that reduces Australia's chronic shortage of dwellings.
"Higher interest rates doesn't advance that cause, indeed it hinders it, as does the current severe lack of finance being extended to the residential development sector."
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The HIA said the RBA had now lifted interest rates five times in six meetings of the RBA board, pushing up standard monthly repayments for first home buyers with a $300,000 mortgage by $247 per month.
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