“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.
What is the evidence that draws me to this conclusion?
- June Quarter Inflation was 0.8% and 4 x 0.8% = 3.2% For all intents inflation is now in the Reserve Bank’s target range of 2-3%.
- When rates hit their low of 2% – banks assessed loans with a buffer of 3% (so assessed at 5%). Interest rates are now at 6%. This is 1% ABOVE the buffer range. We are WELL into the pain band right now (and you don’t need me to tell you that).
- Even if the Reserve stops right now – the damage they have done will take some months to flow through (there are still loans waiting to come off Covid fixed rates).
What should you do – first and foremost – take a breath and realise that you have worked through the worst of the rate rises. Set your household budget with some peace of mind now. Rates will not fall for quite some time – but the “fear” factor has been removed.
Electricity “inflation” is the wild card – if you are able to – add solar and battery to your home – reducing your personal electricity costs. Banks are happy to fund this – Ask Alan if you want help here.
If you want to discuss anything at all to give you peace of mind – ring, email, text me – it’s what I’m here for.
Ask Alan,
Australia’s Mortgage Broker of Choice.