Mortgage borrowing continues to surge
Home loan borrowing could surpass current levels within the next six months, despite riding a record-breaking high since October, according to Finder’s ‘Reserve Bank of Australia Cash Rate Survey’.
Also, half of the experts predicted the rental market would increase by 5% on average across capital cities.
The results of the survey, in which 40 experts and economists weighed in on future cash rate moves and other issues relating to the state of the economy, proved that home borrowing was at unprecedented levels since late 2020 as Australians scrambled to take advantage of low interest rates.
However, according to Graham Cooke, head of consumer research at Finder, the last six months of borrowing may just be the tip of the iceberg.
“Property demand is continuing to run rampant, with buyers spurred on by a combination of fear of missing out and low interest rates – many of which are beginning to rise. The last six months saw the highest amount borrowed to purchase housing over any six-month period in history. What economists have told us is that the next six will be record-breaking,” Cooke said.
“While low rates mean lower repayments, tread cautiously – if you overextend yourself and rates rise, you may find you have a tiger by the tail.”
At the same time, experts said that this may not be a good thing for those trying to buy as one-third of respondents (11, 34%) said auctions were artificially inflating property prices across the country.
As far as the rental market was concerned, Australia saw a two-speed rental market throughout the past year, with prices dipping in capital cities and soaring in regional towns.
According to the survey, a third of respondents (11, 35%) believed that rental prices will remain steady across the country over the next 12 months, while another 50% (14) said prices would increase by 5% on average across the capital cities.
Following this, experts expected that cash rate would not move until 2023, but some banks might raise longer-term rates.
“This sudden wave of lenders increasing longer-term rates and decreasing shorter-term rates reveals a strategy to lock their customers in for shorter time periods. This can be seen as a bet on variable rates increasing sooner than expected,” Cooke added.
“It also reveals that the tide could be turning on our historically low fixed home loan rate environment.
“If you have a home loan and locking it in for a short period suits you, now is the time to compare some of the best mortgage deals on the market before they are gone,” Cooke said.
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