Whether you already have a mortgage or are considering one, it’s understandable that many Australians are nervous about potential changes to interest rates.
Interest rates are essentially market prices, which means they are a function of what can be broadly dubbed a case of supply and demand. There are both short term and long term factors that have driven interest rates lower on a global scale, all of which have in one way or another affected us here at home.
Although they are currently sitting at record lows almost on a global scale, many homeowners right around the nation are understandably anxious about what the future holds for them in the event of any changes. However, the real question at hand is not necessarily if interest rates are expected to rise, but when?
What The Next Year Holds For Interest Rates
Long before the pandemic arrived on our shores, the Australian economy was already showing signs of slowing down, and our economic growth had started to slump. Exacerbated by the effects of the once in a generation health crisis, other contributing factors included ongoing trade wars, heightened political uncertainty in a number of countries and a lack of manufacturing activity.
In an effort to stem this, the Reserve Bank Of Australia continued to drop interest rates to record lows in an effort to keep our economy moving – and it worked. Record low interest rates did their job when it came to supporting the national property market, with Australia currently in the midst of the biggest increase in the national house price average in seventeen years.
However, nothing lasts forever. In March 2021, the Commonwealth Bank of Australia announced its lowest ever fixed rate for home loans on two year fixed periods, dropping to 1.9% per annum. The real surprise though was the announcement in relation to the bank’s four-year fixed term. For owner occupiers, the four year fixed interest rate rose from 1.99% to 2.19%, making them the first of the big four banks to hike the four year rate since October 2019.
With limited supply and ever increasing demand, in October 2021 the Australian Prudential Regulation Authority (otherwise known as APRA) took steps to help ensure that borrowers were capable of making mortgage repayments if – or perhaps, when – home loan interest rates rise. Previously, the minimum interest rate buffer on home loan applications was 2.5% points. In November 2021, this is set to increase to a minimum of 3%, and is a tentative step by the regulator to cool credit growth right around the nation. APRA estimates the small change to Australia’s loan servicing rules will reduce the average person’s maximum borrowing capacity by around 5%.
Considering this complex economical tapestry, are interest rates likely to rise anytime soon? According to what the data tells us, apparently not. As of November 2021, the Reserve Bank of Australia has left the cash rate at 0.1%, and has indicated a rate hike is still some time away. So much so, that RBA governor Philip Lowe has indicated that until inflation and wage growth stabilises, an interest rate hike is unlikely to be seen before the end of 2023 – defying the expectations of financial markets and industry experts alike.
If you’re concerned about interest rates in both the immediate and distant future, it’s worth consulting with the professionals instead of nervously speculating. For prospective first home buyers, it’s important to sign up for a home loan product that is best suited to you with the most favourable terms. For existing homeowners, undertaking an annual home loan health check is considered to be the best way to carefully assess your overall financial position and identify any potential risk factors – but who can help with navigating the world of mortgages?
Partnering With The Brisbane Mortgage Professionals
Getting preapproved for a home loan or taking the time to conduct a home loan health check has long been regarded as stressful, frustrating and time consuming – but the good news is that it doesn’t have to be.
Since their inception in 2012, the team at Madd Loans have worked tirelessly in providing over 2,000 Queenslanders with finance options to help turn their dreams into reality. With the entire brand being built on referrals, owner George Samios takes great pride in making the loan process both fun, educational and stress free – and he has a swag of awards to prove it.
If thinking about your financial future strikes a chord with you, then it might be time to speak to a professional. Whether you’re chasing mortgage solutions or a financial fairy godmother, the team at Madd work together as a collective to turn your goals into reality.