Are you thinking of buying a house in 2022? Most Aussies will need a home loan to finance their property purchase. If you are like the majority of homeowners who will need a mortgage, read on for the three main factors that will influence interest rates in 2022.
Home loans have several advantages, such as flexible repayment schedules, tax benefits, and the ability to select the interest rates that suit you best. Banks and other lenders are always competing with each other for your mortgage application, but factors at play mean interest rates aren’t just governed by the banks.
When the COVID-19 pandemic struck, the Australian government extensively subsidised the housing market. This created ultra-low interest rates at the end of 2020 and the beginning of 2021. Unfortunately, government intervention had longer-term negative effects, with Brisbane seeing a 19% increase in property prices.
The Australian Prudential Regulation Authority (APRA) released new home lending standards in October 2021. These changes reduce the amount of money that prospective homebuyers can borrow. Under the new rules, lending institutions must assess how a borrower can service their loan repayments at an interest rate that is at least three percentage points higher than the actual interest rate. This may in turn start to increase home loan interest rates.
Retail banks have already been increasing fixed mortgage interest rates throughout 2022, and the RBA raised the cash rate on Tuesday 3rd May, increasing it from the historic low of 0.1 per cent, up by 25 bps to 0.35 per cent.
While accessing money is still cheap and very accessible, its important to note that this increase was the first for the cash rate in almost 12 years and the first movement since it was slashed from 0.25 per cent in November 2020.
Property prices have a significant impact on home loan interest rates. Generally, peaking property prices may increase fixed loan rates. This is the current situation in Brisbane where the annual house value growth has increased by +30% for the past 12 months.
There are indications that house value growth in Brisbane will continue for the remainder of 2022:
It can be challenging to fully understand your mortgage options and navigate the changes in interest rates. That is why it's advisable to work with a mortgage professional who can assess and compare mortgage options from multiple lenders for you.
Pivotal Financial offers expert mortgage brokers that understand the various discounts, interest rates, loan types, and lenders that suit your circumstance. We will help you save time by negotiating on your behalf and helping you access special deals so you can get the best interest rate available for your personal situation.