7 financial trends for 2021 and how to take advantage of them

2020 was a wild ride in so many ways, not least with our money. There was the introduction of JobKeeper and mortgage repayment breaks, a significant share-market crash and a new early superannuation withdrawal scheme. But no matter what 2021 has in store (let's hope it's not so chaotic!), you can take charge of your finances.

Our experts break down the trends we're likely to see this year, and give you their top tips for what actions you can take, starting right now.

Home loans in 2021

Sarah Megginson, senior editor, home loans

What to expect with home loan rates this year

Compared to this time last year, most borrowers in Australia are now paying around half the mortgage interest. At least, they should be – 12 months ago, the average variable rate home loan in Australia was in the late 3s, and fixed rate loans hovered around 3.8-4%. Now, those same loans are available with interest rates between 1.89% and 2.5%.

This sharp drop in interest rates has prompted many to refinance their home loans or shop around for a better deal, with ABS figures showing home loan commitments reached "record highs" in the last quarter of 2020.

With interest rates so low, it's easy to see why so many people are shifting from renting to home ownership, while existing home owners are refinancing for a better deal.

Interest rates right now are the lowest they've been in not just years, but decades. For context, just before the GFC, the cash rate was 7.25%. Today, it's just 0.10%.

It's clear that there's not much further interest rates can fall. In the wake of the pandemic-induced economic fallout, banks and lenders have released very competitive offers and interest rates to try and grow their market share. Many are even offering cashback deals of up to $4,000 to get your business, which we expect will continue throughout the year ahead.

What to do with your home loan this year

If you're still waiting to see if interest rates will drop any further before you switch your home loan, you may be waiting for no good reason. Low interest rates are here to stay, at least for 2021, and if they do drop any further, it's likely to be a very minor fall.

Paying too much for your mortgage now in anticipation of greater reductions could be costing you thousands, so if you haven't reviewed your mortgage in the last year or so, it's time to start comparing.

Property prices in 2021

Richard Whitten, senior writer, home loans

What to expect with property prices this year

The Australian property market in 2021 is looking a lot more positive for most of the country. The latest figures from CoreLogic's December Home Values Index show that, overall, property prices grew 3% over 2020. That time period includes the entirety of the pandemic so far. Every major city in the country saw growth throughout the year except Melbourne, where prices fell 1.3% over the year. But the last few months have seen a strong recovery there too.

The factors behind this speedy recovery look set to stay in place in 2021 and are the reason this year looks like a strong one for property prices.

• COVID-19 under control (fingers crossed). With COVID-19 under control (at least for now), real estate markets can grow again. Hopefully, this remains the case in 2021 as we await the vaccine rollout.
• Low interest rates. Lower rates make it easier to borrow money and have had a strong effect on prices. The low-rate environment is likely to stay through 2021.
• Government policy. The federal government has put in place several support policies to encourage home buying and building, including the expanded First Home Loan Deposit Scheme and the HomeBuilder grant. This year, the government also plans to loosen lending laws to make home loan approvals easier. While controversial (there will be a greater burden of responsibility on borrowers to make sure they get a suitable loan), easier access to credit will boost prices. In Victoria, big discounts on stamp duty are another win for buyers.

There are some negative signs that could slow property price growth. Decreased immigration as a result of COVID-19 could lower demand and unemployment remains high as well as the fact that Australia's economic recovery is concentrated among certain sections of the country (older and wealthier people). This uneven recovery and youth unemployment could dampen prices or simply further the divide between those who can afford property and those who can't.

What to do if you want to enter the property market this year

If you want to buy a property in 2021, it's a really good idea to look again at your savings and spending habits, draw up a realistic budget and figure out your potential borrowing power. This will give you an idea of how much you may be able to borrow and what your repayments would be. From here, you can start to look at properties within your budget.

It's also a good idea to check what government support may be available, such as the First Home Loan Deposit Scheme or the HomeBuilder grant if you're considering building.

If you're looking for some inspiration on where to buy, here are five capital cities that are expected to see property price rises in 2021.

Savings accounts in 2021

Alison Banney, editor, banking and super

What to expect with your savings this year
I hate to be the bearer of bad news, but if you've got money in a savings account or term deposit, it will continue to earn a low interest rate this year.

The RBA set the official cash rate to a historic low of just 0.10% in 2020 and has made it clear that these low rates are here to stay for at least a couple of years. This is great news if you're looking to get a home loan, but not so great if you're trying to earn a decent return on your cash in the bank.

What to do with your savings this year

Although rates will stay low, there are a few accounts in the market that offer interest rates well above the rest, so it still pays to compare and switch savings accounts this year. For example, while interest rates below 1.50% p.a. are the new norm, if you're under 30 you can still earn 3.00% p.a. with the Westpac Life account.

Although the rates might be low, with continued economic uncertainty this year, it's more important than ever to have a safety net in place. So if you don't already have an emergency savings fund, it's a good time to start building one. Your deposit up to $250,000 in an Australian bank is protected by the government. If you were to find yourself suddenly out of a job this year, you'll be really pleased to have a few months' worth of living expenses ready for you in the bank.

Superannuation in 2021

What to expect with superannuation this year

One of the biggest changes to super this year is the super guarantee (the super your employer is required to pay you). This is set to increase from 9.5% of your annual income to 10% as of July. This could have both positive and negative implications for you.

If your superannuation is included in your total salary or package, this means your take-home pay could be slightly lower as a greater chunk is sent to super. However, that money in your super will continue to compound over time and help you retire with more money. If your super is counted in addition to your base salary, this means your take-home pay will remain the same plus you'll also be earning more in super contributions.

From July, your super fund will also be "stapled" to you from job to job. This means if you change positions, your new employer will look up your current fund and pay your super into that. This is a win for consumers as it'll prevent people from having multiple super accounts.

What to do with your super this year

If you're going to keep the same fund with you from job to job, it's worth taking some time now to compare super funds and make sure you're with a good one.

We'll likely see continued share market volatility this year (although to a much lesser extent to 2020). If you're considering switching your investment options this year (for example moving out of stocks and into cash, or vice versa), keep in mind that super is a long-term game. In March 2020, a lot of people panicked about their super being invested in shares; however, the general advice was to remain calm and leave your super alone. And now, most diversified super funds have already recovered a lot of their losses.

Insurance trends for 2021

Nicola Middlemiss, senior writer, insurance

What to expect with your insurance this year

One of the biggest things to watch out for is the changes to health insurance that are coming on 1 April 2021. Dependent children will be allowed to stay on their parents' family health insurance policy until they reach 31. At the moment, they can stay on until they reach 25. For dependents with a disability, the age limit will be scrapped altogether.

This means far more young people will be able to retain access to private health cover and families who are caring for a dependent with a disability will be able to lean on the private healthcare system. For some families, this extra benefit may be what it takes to keep their health insurance policy or even take one out for the first time.

What to do with your insurance this year

If you've got dependent children under the age of 31, check with your insurer that this policy change will apply. If it doesn't, consider comparing and switching to a policy that will be making this change.

Also keep in mind that we'll see private health insurance premiums increase in April this year. This didn't happen in April last year as we were in the midst of the pandemic; however, we can't expect the same delay to price hikes this time around. Before you accept your new premiums, shop around for a health insurance policy that offers more extras or special sign-up deals for a lower price.

Credit cards in 2021

Amy-Bradney-George, acting editor, credit cards

What to expect from your credit card this year

After the financial uncertainty of 2020, it's likely that a lot of people will focus on paying down credit card debt. Data from the RBA shows this was the trend last year, with the total credit card debt dropping from $47.9 billion in January 2020 to $37.4 billion in October 2020 – a drop of almost $11 million.

But for some people, job uncertainty and the rolling back of financial support could see some people relying more heavily on credit cards. Given the average credit card interest rate has been around 19% p.a. for the past decade, there is a very real risk of spiralling debt.

On the market side of things, it's likely that buy now pay later (BNPL) plans will continue to influence credit card features in 2021. Last year, we saw the launch of a completely new type of credit card in Australia: no interest, monthly fee cards, with options from both NAB and CommBank.

American Express also joined a bunch of other providers in offering instalment plans for eligible purchases. These plans let you make fixed repayments over a set amount of time, usually with a promotional interest rate or a small fee instead of the usual interest charges. It's similar to how you'd pay off purchases with Afterpay or another buy now, pay later plan.

In the second half of 2020, Amex also partnered with Afterpay, which means card members can pay off an Afterpay account with their Amex card and earn points. Afterpay already accepted payments from Visa and Mastercard credit cards, but with all three there is a risk of interest charges.

What to do with your credit card this year

If you've got debt you want to pay off this year, moving it to a credit card with a 0% balance transfer offer could help you save on interest for up to 30 months. If you're chasing rewards, shop around for a card with the right mix of benefits and costs – and remember lots of credit card reward programs let you transfer points to frequent flyer partners if you don't want to keep all your eggs in one (travel-sized) basket.

If you're currently struggling with credit card debt, you can get free advice from a financial counsellor by calling the National Debt Helpline on 1800 007 007.

The stock market in 2021

Kylie Purcell, investments editor

What to expect from the stock market this year

If 2020 has shown us anything, it's that you can't predict which direction the stock market will run. That being said, 2021 looks set to carry many of the same themes that we saw last year.

With so much uncertainty around COVID-19, US politics and Australia-China relations, shares will most likely stay volatile. At the same time, record-low interest rates mean the stock market is still one of the best options available for Australians looking to find a decent return on their money. Notwithstanding any new surprises, this should have a positive impact on stock prices running into the new year.

Ultimately, market performance depends on whether global economies recover on the back of a swift vaccine rollout. If a vaccine proves successful and governments remove restrictions, we're likely to see a boom of business activity outside of the digital space.

Stocks in the travel, banking and energy sectors are expected to benefit, while IT stocks that surged during COVID-19 lockdowns might see a temporary slowdown as investors adjust their portfolios.

What to do with your shares this year

Market volatility creates good opportunities to buy shares at discounted prices. Although a lot of stocks have recovered from their March 2020 falls, there are still many on the market that are playing catch up.

If you want to buy shares for the first time this year (see steps on how to do this) or if you want to build your existing portfolio, take some time in January to create a shopping list of stocks and the ideal prices you'd like to get them for. This way, you'll be ready to pounce when the price is right and you're less likely to make hasty purchases in the heat of the moment.