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It's Not The Christmas Gift We Wanted The Rba Lifts Interest Rates Again

It may be almost Christmas but it won't feel like it for thousands of homeowners in Australia, who are facing another hike in mortgage repayments.

📈 Today, the RBA handed down another rate rise of 0.25% – an unprecedented eighth rise in a row – to 3.1%

🫰Taking the average mortgage holder on a 25-year 600K loan repayment to $3330 a month – $790 (based on the original loan at 1.99%) more than in April.

Why are we facing another interest rate hike?

Inflation is still rising - it's currently at a 21-year-high - and the reserve bank is concerned it still doesn't have the economy under control.

• Inflation is predominately a supply and demand issue. For example, the lack of cars, has led to price increases in new and secondhand cars.

  • Rents have gone up because there are not enough properties for the people who want them.

  • The good news: fruit and veg costs have dropped a bit since last month.

• The Reserve Bank wants Australia's inflation to be in the 2-3% range but currently it is sitting at a stubbornly high 6.9%.

Be aware: news outlets are starting to report on Aussies who are already feeling the pain – with some homeowners already selling their property to get out of ultra-high mortgage repayments.

Who will be most impacted by today's cash rate increase

Variable rate mortgage holders are braced for an increase. But households with a fixed rate mortgage expiring in 2023 are starting to get nervous.

• Those most likely to suffer the most are those who bought at the peak of the market in 2021 with less than a 20% deposit, whose homes are now worth less than they bought them for.

• People who took advantage of ultra low sub-2% rates in 2020 and 2021 are starting to roll off into 4% rates or higher.

Be aware: finance experts are predicting the cash rate will hit 4.5% by the end of 2024. Ouch.

So – what can you do?

All signs point to 2023 being a challenging year for the average household.

💪 So now’s the time to be proactive.

Our Compare Club Home Loan GM Anthony Stevenson recommends you:

1. Find a more affordable mortgage – there’s a real risk that thousands of homeowners could get locked in an avoidable mortgage prison.

2. Be quick if you can – there isn’t long until Christmas so anybody who needs to lower the mortgage should speak to a broker today before the lenders shut down for the holidays.

3. And for anyone on an ultra-low mortgage that is about to expire in 2023 – start to do your research and speak to a broker sooner rather than later.

The bottom line: there are silver linings in the property market

It’s not all doom and gloom.

Some lenders are moving their fixed rates closer to the current variable rates – which will give buyers and existing homeowners more choice and security.

💰 There’s are also some serious offers available now too – one lender is even offering up to $10,000 cashback – although you’ll need a loan of $2m or over to access it.

🌈 And on the upside, the RBA doesn't meet in January so that means no rate rise that month either.

Disclaimer:

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions.