Lending & Property Update – February 2022

As we launch into a new calendar year, markets worldwide have slumped against inflation fears, and Australia has not been immune.

Many economists previously held the viewpoint that a rate-rise in 2022 was unlikely, however recent developments seem to have everyone doing an about-face. February’s RBA meeting has flagged a number of economic pressures that likely mean a rate hike is only a matter of time.

Fixed interest rates are yet to react to the Reserve Bank of Australia (RBA) Governor’s February commentary, however over the past few months, rates have been creeping up regardless. During and post-lockdown, fixed rates for owner occupier properties we averaging below the 2% mark, however now rates this low are rare. Many fixed rates seem to be comparable to current variable rates, however there are still a few bargains around.

Credit growth in December has remained strong with a 0.8% increase leading to an overall growth of 7.2% for the year – the highest in 13 years. In particular, post -lockdown business credit grew by 1.1%, which was after a 1.6% increase in November. Demand here is expected to stay strong, considering the many government incentives available.

The record run in the property market is continuing, however the pace seems to have slowed a little. The three-month growth rate in dwelling prices has slowed slightly to 3.4%, however strong demand continues. During the first round of lockdowns, regional markets seemed to outperform their city peers, which is trend that is continuing into 2022.  Brisbane and Adelaide markets are now the outperformers amongst the capital cities. Overall, the forecast for 2022 is that dwelling prices will continue to new highs, however the much-anticipated rate rise will most likely put the brakes on as all home owners’ repayments start to creep upwards.

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