Interest rates are set to start rising. What does that mean for mortgage holders and homebuyers?

Experts expect property prices to decline as interest rates rise, with the Reserve Bank forecasting that a 2 percentage point rise in the cash rate would lop an estimated 15% off real housing prices. Photograph: jax10289/Getty Images/iStockphoto

The prospect of the Reserve Bank of Australia raising the cash rate in May has prompted a spike in queries about fixed loans from borrowers and reinforced expectations that property prices will fall, including in Melbourne and Sydney where they may already have peaked.

Traders have priced in a lift in the RBA’s cash rate to 0.25% at its 3 May meeting after Wednesday’s March quarter inflation data was much higher than forecast.