“The balance of risks now favour the prospect that the RBA is now on hold” – Bill Evans (The Australian Wed 2nd Aug 2023)
I predicted quite some time ago that the “peak” of this interest rate cycle would be 6% (to you) and that you should plan around that – and that appears to be correct.
Read moreShould it surprise us that 100% of economists on Monday became only 70% of economists by Wednesday?
I will carefully analyse what the Reserve Bank board says as well as Bill Evans.
I think it is possible that with this Reserve Bank board undergoing significant change by September that they wanted to fire one last shot – I will write in detail next week.
Today… I am aware that for some of my clients any interest rate change is now causing concern – meaning that all expenditure and income is under review given that the home loan is now vacuuming out more of your cash – that is the very point of the bluntness of the interest rate tool in order to cool an economy (post Covid).
Read moreIt is with a reasonable degree of confidence that I can say that interest rates have peaked (Bill Evans: The Weekend Australian: Sat 29th Apr: page 30).
At the start of this cycle, I suggested that you plan for a peak of 5.5% (and more recently 6% just to cover a worst case).
Interest rates, to you, have now peaked (if I am correct) at just under that 5.5%.
You should now budget for rates at this higher level for a reasonable period ahead.
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I am always open to opportunities with new lenders for my new to bank clients.
Under BID (Best Interest Duty) my obligations are clear – and they are obligations on me personally.
Banks have absolutely no obligations under BID.
This means that in the main – our interests do not align.
There is one place they do – new business.
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With the Reserve Bank likely lifting rates later today – how best to plan ahead.
I asked two clients recently if they were interested in hearing why rates are being lifted – and their answer could not have been clearer … “no – we read your emails because you tell us how to plan”
The so-called experts (and even Bill Evans from Westpac has changed his view a few times recently) seem divided but also in agreement on between 1 and 3 rates rises – including today’s.
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Covid came along and no government in the world quite knew how to respond… they planned for the worst.
I cannot count the number of times in my 25 years of mortgage broking I have heard the “I’m waiting for the crash” reason for delaying a buying decision.
First – EVERY buyer (me included) hopes for property to be “down” 5 minutes before they buy and then “up” 5 minutes after they have bought.
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Fortnightly …. To Be or Not to Be ….
I can tell from the questions I am being asked that rates are starting to have an effect and people are being not only more careful with their money but also trying to create additional value.
Tell me who “hasn’t” heard that paying a loan fortnightly shortens the loan term?
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Inflation was slightly higher in December than expected. Inflation kicked off with oil price shocks caused by the Russia/Ukraine conflict, so rate rises did feel a “bit unfair” to many.
However, in December one of the single biggest contributors was travel and holidays. After two years of disappointment, we all spent whatever it took to have a holiday (and so we should). But that is 100% discretionary spending, on us. Too much money chasing too few goods. That always has a bad end – with the price of everything going up. Inflation kills wealth and inflation has to be controlled.
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Amidst all the bad news of 2022 comes some good news at last.
It is just possible that the rate of inflation in Australia has peaked (in October) earlier than predicted by economists (The Australian 1 Dec 2022: Robert Gottliebsen).
(By the way – what do you call 100 economists in a room?… a vacuum!)
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