Don’t we all wish we had a crystal ball…. never truer!

The Australian property market and interest rates are throwing everyone into a spin.

Rates are rising.

Cost of living is increasing.

Consumer confidence is down.

The market is spooked.

We have all stopped spending.

So what is next?

The state of the property market

The saving grace for our region is the continued population boom and ongoing major infrastructure. We are in a good position to weather this storm.

We are still seeing a lack of short-term supply that should help established properties retain their value over the coming few years. The increase in rates and cost of living also sees investors back in the driver’s seat with less competition from owner-occupiers.

You will see properties staying on the market for a longer duration and taking longer to sell. There is a definitive shift away from a ‘seller’s market’, which we have seen over the past few years, to a ‘buyer’s market’. How long this shift will last remains to be seen.

The feeling amongst Agents out there is that we will see an increase in stock levels over the peak Spring/Summer months. There may be an increase, but definitely not a flood of new listings.

Buyers will start to adjust and become comfortable with new interest rates and the result will be increased competition in desirable areas for quality properties.

Whilst we will see an increase, we need to be mindful that it will likely not reach those peak COVID-induced 2021 levels.

Those levels may now be a thing of the past.

Rising interest rates

As we all know, we have enjoyed historically low rates for the past three years. These rates were always unsustainable in the long term. They were purely to get through a global pandemic. It was always going to come to an end.

That time is now.

The question on everyone’s lips is how high will they go?

Economists predict they can go as high as 5% by the end of 2022 and even up to 6% in 2023. We may see a plateau throughout 2023 once we hit the 6% mark.

We are already seeing fixed-rate 3 and 5 years terms at this rate. It is not to be unexpected. The 3 and 5-year fixed rate terms give a good indication of where banks predict rates will go. Most are now sitting around the 6% mark.

For those wondering whether it is best to fix your loan now or ride out the variable rate – this is a personal choice. Splitting your home loan between a mix of the two is always a viable option.

5 ways to deal with rising interest rates

  1. Budget

    Review your last 12 months of bank and credit card statements and calculate your average monthly income and expenses. Where are you over-spending? Where can you cut back? Create a budget and stick to it.

  2. Side hustles

    Are there opportunities you can explore to increase your income? Asking for a raise, switching jobs, doing more overtime, starting a side hustle or renting out a spare bedroom? Start thinking outside the box for ways you can boost your income.

  3. Reduce expenses

    Look for ways to reduce your expenses such as bringing your lunch to work, going out less, cancelling subscriptions you rarely use, buying fewer gadgets, holiday in Australia rather than overseas. When was the last time you shopped your insurance or electricity with other providers? We tend not to explore these options as they are a pain – but well worth it for the savings.

  4. Prepare for the worst

    Pretend your home loan rate is 1.50 percentage points higher and pay the difference into your offset/redraw account or a separate savings account. Or better yet, pay it straight to your loan now to build up a buffer and prepare for future rate rises.

  5. Refinance

    Shop around and consider refinancing to a lower-rate loan so future rate rises start from a lower base. At Fusion Financial Solutions, we specialise in mortgage broking to assist our clients in evaluating their current loan and refinancing where beneficial to do so.

As with any rise and falls in the market and global financial uncertainty, these periods will end. And no doubt, we will see them again multiple times in our lifetime. Having a plan of how to weather these tough times will help to reduce stress whilst protecting your assets, income and provide peace of mind.

If you’d like to chat to the team about your options to refinance, get in touch with a member of our team.