Interest Rates in 2022, an Important Message

I am writing again – to let you know how I think the interest rate scenario will unfold in 2022 and how to prepare together. We each have roles.

The pieces are falling into place for the Reserve Bank to start to lift the cash rate.

• Inflation between 2% and 3% – is already in place.
• Unemployment under 4% – this is imminent.
• Wages growth above 3% – is the missing piece.

To repeat from an earlier email, this is how I see the rate scenario playing out this year…

The Reserve Bank also recently notes that banks have reduced their margins by more than their funding costs to compete for business.

• The Reserve Bank – lifts the cash rate by 0.15% (or 0.25%).
• Banks lift home loan interest rates by 0.25% (or 0.35%) citing “funding cost pressures”.
• BUT – either lifting the interest rate to attract NEW business by only 0.15% (or 0.25%).

I will ensure in my 6 monthly reviews that your rate will only rise to match what is being offered to new customers.

Some of you will have already received my email of your own 6 monthly review and rate reduction to the current “new to bank” offer.

I simply call this fair – and this is where I specifically ‘take action to create value for you’ This is my commitment to customer service in action.

I am happy to be known for this.

Until I hear Bill Evans (from Westpac) alter his view – then we plan for the peak of the next interest rate cycle at 4%.

• This is nothing to fear – this is where rates started from pre-Covid. Rates go up, rates go down – this is the life of your home loan.
• Fixing your rate is a terrible response (the response of fear) – fixed rates are ALREADY at 4% – why would you volunteer more than you need to?
• You should work out what your payments would be “if” rates were 4% (use my app) and start paying that now – this alleviates the budget fear. Your home loan payments should be like tax, paid first from your salary and live off the rest.
• It is DEFINITELY time to strip out unnecessary costs from your budget – do you really need the 6 streaming services you took on during Covid, as just one example?

Remember, if you’d like some advice specific to your circumstances – I’m here on call or email anytime. It’s what I’m here for.

Ask Alan

Brisbane’s Trusted Mortgage Broker, Alan Heath