2021: It’s a wrap!

It has been another extraordinary year. The pandemic has dragged on, driving New South Wales and Victoria into extensive lockdowns, and state borders were closed – in some cases for months. But there’s been plenty of lively action in the home loan and property markets. 

Let’s take a look at the key developments of 2021 – and what may lie ahead.

Property values kept climbing...but the tide may be turning

Despite all the upheaval of the pandemic, the housing market didn’t miss a beat, recording gains of 22% nationally in the 12 months to November 2021¹.

However, according to the latest REA PropTrack Housing Market Indicators Report², there are signs that some of the heat is coming out of the market.

REA notes, “We are still seeing many active buyers, but for the first time since the pandemic began, the strong ramp up in new listings has given them more choice. Buyers continue to outweigh sellers, but the gap is narrowing, meaning the strength of the sellers’ market is softening”².

That could be the good news first home buyers, who have been waiting for their opportunity to jump into the market!

Investors ramped up

2021 saw investors waste no time snaring their slice of the property market, with loans to investors rising 89.6% over the 12 months to October 2021³. 

What was different this time around is that many investors sought the affordability of regional areas. 

That’s according to REA’s 2021 PropTrack Regional Australia report. It found the top three most-enquired investor suburbs across regional locations were Surfers Paradise, Broadbeach (both QLD) and Wollongong (NSW). 

APRA lifts stress test benchmark

October 2021 saw bank regulator – APRA, ask lenders to lift their stress test interest rate from 2.5% to 3.0%⁴.

It means lenders will likely check if you can comfortably manage home loan repayments assuming interest rates were 3% higher than the current rate.

APRA says the move was designed to ensure banks “are lending to borrowers who can afford the level of debt they are taking on – both today and into the future”. However, it also makes it even more important to seek expert home loan advice especially if you’re buying close to the top of your budget.

Interest rates – what can we expect?

The Reserve Bank kept the cash rate on hold at a tiny 0.1% during 2021⁵. But that didn’t stop lenders shuffling their home loan rates throughout the year.

According to RateCity⁶, 2021 saw 107 lenders cut at least one variable rate – though typically only for new customers. It can be a cue to consider refinancing – more so because the number of variable rates under 2% has steadily increased. 

RateCity says at the start of the year there were 15 variable mortgage rates starting with a ‘1’. Now there are 65⁶.

On the flipside, fixed rates have been rising. The number of fixed home loan rates under 2% peaked in April says RateCity⁶. There is still a healthy selection of lenders with fixed rates below 2% but RteCity warns “by this time next year there could be none”.

As we flip the calendar to 2022, COVID will still be with us. But there is plenty to be positive about including the potential for more moderate property price growth, an abundance of low rate home loans – and the reopening of interstate and global travel that lets us reconnect with family and friends. 

Use the holiday season to have a chat with your Mortgage Choice broker to see how you can put your property plans into action in 2022.