In the last few days of 2021, looking back it can be said that we have certainly had a year with many unexpected twists and turns. The property market on all fronts has changed dramatically, with LVR restrictions coming in, affecting first home buyers and property investors. We’re also in a space from a funding perspective where things have got harder due to increased regulation and unprecedented levels of demand for funding — to the point where many nonbank lenders are out of funds to lend this side of Christmas/New Year.

Focusing on interest rates specifically, we have seen rates continue to increase as time marches on. The recent Official Cash Rate (OCR) has been increased 0.50%. As a result, we have seen some two and three-year rates lower than they were not too long ago.

From a pricing perspective as I mentioned last time, SBS have been a favourite for many borrowers on various fixed rate terms, although they, too, have recently raised their rates (but are still competitive amongst all terms).

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Pricing has ranged a lot with the lowest one-year rate still being 1.85% from Heartland, with other major Aust/NZ banks starting at 3.45%. This ranges right through to a five-year between 3.19% (Heartland) and rates in the very high 5%’s for Aust/NZ banks.

When it comes to individual loan structures and what may be best for you, it’s always smart to sit down and have a chat with your adviser. Mortgage management involves getting a firm understanding of what your goals are (short and long term) and strategising something that fits within this. For many people this may simply be taking the lowest rate possible (one-year in many cases) and wearing the risk that rates may go up.

However, for others it could be fixing in longer-term and wearing a higher cost upfront but having certainty and peace of mind for years ahead.

As rates have started trending up, on average many borrowers have preferred the latter for obvious reasons. It seems that wise borrowers are more acutely aware of the risks of rising interest rates and their effects and are taking the advice of many commentators out there.

One of the concerns, of course, is that two out of three mortgage lenders come up for renewal (fixed rate expires) in the next 12 months. With this being the case there will be many people facing significantly higher interest rates this year. It will be interesting to see how this plays out, and hopefully people frontfoot this by getting in touch with their adviser now for a review.