Hello. How has the past couple of weeks treated you? It has been a big one, with the Reserve Bank of Australia (RBA) announcing the cash rate increase last Tuesday.
In case you missed it, the RBA have increased the cash rate for a second month in a row – this time by 50 basis points. This brings the cash rate from 0.35% to 0.85%.
All four major banks have passed on the full rate hike to home loan customers, however the good news is that for some who have funds on deposit (savings) in the bank, then rate rises are being passed on to these customers.
There remains considerable discussion in the market on whether the RBA is acting prudently regarding rate rises, and who it is really impacting. For many economists it was a shock. The RBA is hoping rate rises will make a quick impact to the high costs of living expenses and slow inflation.
Sally Tindall, RateCity
The RBA feels most home loan customers can absorb the rate rise. So hopefully for most, you’ve been getting ahead on your mortgage. According to Sally Tindall from RateCity, the average mortgage holder is around 45 months on their mortgage.
If you have a home loan, now is time to start thinking about what your finances may look like over the next couple of years. If a rate rise doesn’t look like it will fit your budget, you should take time to act now. This means you may need to also start to cut back on regular expenses or consider a salary increase from your boss!! If you are thinking about refinancing, then probably better to seek that out now rather than wait.
Not all lenders have increased variable and fixed rates at the same price, so you may want to check out if it is a good idea to refinance.
Will rates stay as high as they are or even increase further? There is talk that next calendar year rates may need to decrease due to worldwide stagflation effects. If so then it may be a good time to refinance to a lender offering a lower introductory rate say for one year and then as that term expires see where fixed rates are sitting.
Read more here about the rate rise:
Any person seeking to undertake an investment strategy or a change in their retirement planning should always consider seeking professional legal or financial advice and seeking the expertise of a qualified tax accountant.
Good luck with the investing strategies.
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