The new housing rules - interest rates to rise within 15-18 months?

The Australian Government has started providing a loan guarantee to first home buyers, who can now buy houses with only a 5% deposit. This policy was scheduled to start in 2026 but has been rushed forward to 1st of October 2025. Now in play.

This means estimates will:

• Bring forward an additional ~210,000 first home buyers into the market;               This could consist of brand new builds, or established properties sub $1mill market

• Increase total housing credit by $166b in the Big 4 banks over 2 years = +6.5%;

• Increase housing prices by an additional 8% over the next year;

• Lift housing wealth by +8% & ↑ housing t/o => +1.1% total consumption GDP Q4’25 -> Q1’27. This might keep inflation along with minimum wage increases higher, meaning not many rate cuts in the numbers can be afforded until early next year at best?

So, the coming housing upswing could be the catalyst for a narrative to build around a plausible pathway to interest rate hikes within the next 15 months (ie; ~March 2027 or thereabouts).

The rally may be short lived in housing prices, even though adding potentially up to 8-10%. A short and sharp rise probably is expected over the next 9 months from here.

Banks ultimately look at people’s ability to service a loan, and any falter in an applicant’s employment will be telling for an applicant.