Rate rises weigh on house prices

House prices have grown at their slowest pace since the global financial crisis, economists say house prices nationwide have grown at their slowest pace since the global financial crisis, following a series of rate rises early this year and ongoing fears of rising mortgage costs, economists say.

The Australian house price index rose 0.1 per cent in the September quarter, the Australian Bureau of Statistics said on Monday.

It was the series' slowest pace of quarterly growth since March 2009, when house prices contracted 0.8 per cent. In the year to September, house prices grew 11.5 per cent.

JP Morgan economist Ben Jarman said the September quarter was a fairly soft outcome but was predictable.

"Clearly the absence of stimulus support, the first home buyers grant winding off and also the fact that we've had 150 basis points of official rate hikes is just starting to weigh on things in the housing the market," he said.

At the end of 2009, the government rolled back its $14,000 grant to new homebuyers for established dwellings to $7000.

Meanwhile, the Reserve Bank of Australia (RBA) took the cash rate from three to 4.5 per cent in six incremental moves between October 2009 and May 2010.

There is some speculation the RBA might lift the cash rate on Tuesday to 4.75 per cent.

That would add about $50 to monthly repayments on a 25-year, $300,000 mortgage.

Commonwealth Bank senior economist John Peters said that data showed that demand for housing was outstripping supply.

"It's as you would expect. House prices have crept higher in the quarter," he said.

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