Nila Sweeney
Mortgage holders, take note: there’s a good chance you’ll be paying up to 2% more for your home loan by Christmas 2013.
 
At least, that’s what industry forecasters BIS Shrapnel are predicting.
 
BIS Shrapnel is expecting a recovery in residential property markets that will drive interest rates up by 2% in the next two years, boosting the standard variable rate on a home loan up to 9.5%.
 
BIS Shrapnel senior manager Angie Zigomanis points to a potent mix of a strengthening economy, record low unemployment and increasing net migration as the key drivers of Australia’s forthcoming real estate recovery.
  
“Economic growth is forecast to regain traction through 2011, and continue to accelerate in 2012 and 2013 as resources investment flows through to the rest of the economy,” Zigomanis says.
 
“Strengthening employment growth – the unemployment rate is forecast to fall below four per cent in 2013 – will also see net overseas migration inflows turn around, and the underlying demand for new dwellings begin to rise.”
 
With the level of new housing construction on the decline across the nation, Zigomanis says the corresponding fall in building completions will lead to an even lower supply of housing.
 
“This will underpin the strength of residential conditions, causing rental markets to tighten and rental growth to pick up, particularly in those markets where it has been weakest in the last couple of years,” he adds.
 
So what does this mean for the everyday mortgage holder – or those who are considering getting a home loan in the near future?
 
According to BIS Shrapnel, there will be one or two interest rate rises in the next twelve months, which will allow confidence to start returning to the property market as economic growth strengthens.
 
As momentum builds and the economy approaches boom conditions, improved confidence will come from strong employment and income growth, which will maintain property buyer demand.
   
These “booming economic conditions” are then forecast to eventually cause inflationary pressures, which will encourage the Reserve Bank of Australia to adopt a more aggressive stance on interest rates.
 
“Housing rates are consequently forecast to peak at 9.5% by the end of 2013,” Zigomanis says. “(Interest) rates at his level will eventually bring about a downturn in both the residential market and the economy over 2014.”
 
The moral of the story? If you’re concerned that increasing interest rates will put pressure on your household finances, perhaps this is the right time to lock your loan into a fixed rate – or a the minimum, you could consider splitting your mortgage so that at least half of the loan is fixed. It will give you valuable peace of mind against rising rates, now and in the future.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan