Interest rates and home values typically have an inverse relationship. Rising rates reduce borrowing capacity and demand for debt, and increase the cost of servicing a mortgage. This can contribute to a slowdown in housing demand. The opposite is true in that when interest rates are falling, prices tend to rise. Figure 1 plots the RBA cash rate target alongside monthly changes in the CoreLogic Home Value Index. From late 2022 to mid-2023, the growth trend improves despite a record rise in the underlying cash rate. {chart} Initially, home values had a strong reaction to rate rises, falling -7.5% between April 2022 and ... (full story)