Andrew Bell Market Update 2026 | Issue 21
Hi, Andrew Bell with you once again. Some interesting thoughts to share with you this week.
First up, we’ve all been keen to see how consumers are handling higher interest rates well, despite home loan interest rates being up 1% across the year only around 1% of home loans are behind in repayments, which is why we’re not seeing any significant number of forced sales.
We’re also starting to see interest only loans make up nearly 1 in 4 new home loans, as more borrowers look to lower their monthly repayments by paying just the interest component, rather than both interest and principal.
And there’s quite a lot of movement in home loan space with mortgage borrowers across the country currently switching around $1 billion every day between lenders as people look for better deals. It’s actually forcing banks to fight over a shrinking pie and sharpen their efforts to retain their customers. A really good outcome for borrowers.
To give you a clearer picture on this, around 664,000 home loan customers, accounting for approximately $371 billion in mortgage balances, shifted lenders in the year to 30th of June. That’s an increase of 13% over the amount that switched in the year before, 24-25 financial year.
Breaking it down even further. That’s more than 1,800 customers every day shifting their mortgages from one bank institution to another.
I was also speaking with a close friend of mine recently who was saying that now wasn’t a time to buy, because interest rates had risen by about 1%. I did a bit of a deep dive with this person, and asked how much they were looking to borrow. Turned out they were looking at a borrowing around $1 million to purchase a property for just under 1.4 million.
I said to them that it’s easy to focus on just one aspect of the real estate transaction, and that’s the cost of borrowing money. I acknowledge that a 1% increase in interest rates on a $1 million loan represented approximately $10,000 of additional interest in the course of a year. Now, that’s a sizable amount by any measure.
But I said that if they could afford to carry that additional cost for, say, the 12 months, that they should consider the other side of the buying equation. The price correction we’re seeing in the marketplace at present meant that property values might have been $1.4 million six months ago, but now could have declined in value by, say, 5%. That’s a reduction of $70,000 in the purchase price.
So in simple language, yes. Their interest costs would be up $10,000 or more a year, but they could save $70,000 on the purchase price.
The other thing to remember about interest rates is they don’t stay at high levels forever. If you look at the history of interest rates, they generally rise. Reach a peak and then remain at that level for a period of time. And then once they’ve done their job of slowing inflation, they start to decline again.
That whole cycle might be as long as, say, two years, sometimes shorter, sometimes a bit longer, although there’s never any guarantee about exactly when the rates will come down.
But that does mean that higher interest rates can actually be a friend of the purchaser, because they put downward pressure on property prices, potentially creating a significant capital saving for the buyer. Whilst the pain of higher interest rates might only last for a year or two before repayments start to ease.
Now, of course, buyers need to be confident that they can afford those higher payments, even if interest rates remain elevated for longer than expected. Property prices can also fall further than 5%. So it’s important to buy the right property and take a longer term view. Takes a bit for some people to get their minds around that.
I saw a report this last week that showed that even if property values fell by another 10%, the share markets remained at their current levels. But housing prices in Brisbane, Adelaide, Hobart, Perth and Canberra would still have increased more since the year 2000 than every major global share market. Apart from the technology focused Nasdaq index.
The report went on to say that Australian housing has been one of the best performing asset classes anywhere in the world. It also noted the fact that most capital cities would still be ahead of global share markets, even if there was that further 10% fall in property values.
Certainly demonstrates how much equity long term property owners have built up, and why short term corrections rarely derail patient investors.
It’s important to understand that this analysis purely focused on capital growth, because there was insufficient long term data covering rents and dividends and borrowing costs and other property related expenses.
Markets of all types, not just the real estate market, go through cycles. Right now, we’ve seen some of the best buying conditions for real estate purchases that we’ve experienced in more than five years. These are opportunities that buyers should be seriously thinking about.
So what we’re going through right now is just a resetting of property values, which is a good thing in helping to stabilize the market before the next inevitable upswing further down the track.
Now, there’s lots and lots of more information that I’ve been working on, which I look forward to sharing with you over the weeks ahead.
We’re certainly now in the build up to our big January marketing program, The Event, which has become recognized around the country as a leading property marketing program with a national profile. Held in January, The Event provides a wonderful opportunity to promote Gold Coast properties to one of the largest audiences that we attract every year here on the Gold Coast.
If you’ve got a property and you’re thinking about selling, please reach out to us. We’d only be too delighted to give you more insights into The Event and how it could work for you and your property.
We also have our BELLissimo charity lunch tomorrow, and I look forward to seeing many of you as we continue to support the young children living with muscular dystrophy. Today, we’ve raised over $4 million for the Muscular Dystrophy Association, and we look forward to adding to that tomorrow.
Finally, we are now in the final run to Christmas. Early preparations takes away so much of that last minute stress, so I hope your lead up to the festive season goes well. See you next time.
