The Reserve Bank increased the cash rate by 0.25% at its March 7th Board meeting. The cash rate now sits at 3.6%, the highest level since 2102. It is expected that lenders will pass this on in full to borrowers resulting in higher mortgage repayments.
After ten consecutive months of rate rises, pressure on household budgets is real for many mortgage holders. There is now a growing argument for the Reserve Bank to pause on further rate rises to allow time for the true impact of the 10 rate rises we’ve had so far to follow through. However there are still indicators to suggest it’s probably not a good idea to assume we’ve hit the peak of rates.
We always say, in times like this, it’s better to be cautious and consider further rate rises. If we do get a pause in rate rises, it’s a bonus.
Here’s our take on the Reserve Bank’s announcement on Tuesday.
- The RBA recognised that the full effect of the rates rises is yet to be felt for many mortgage holders.
- The RBA recognised that some households have substantial savings buffers however others are feeling a ‘painful squeeze’ on budgets.
- The RBA indicates their goal is to return inflation to the target level of 2-3% and that further tightening of monetary policy, will be needed to ensure inflation is returned to target.
- In assessing when and how much further interest rates need to increase, the Board will look at the global economy, trends in household spending, the out look for inflation and the labour market.
Economists are discussing the fine line between the Reserve Bank doing too much (further rates rises may push the economy in to recession) and not enough (pausing on further rates rises may cause further damage to the economy if inflation is not reigned in). It is a challenging and difficult balance. As data about the economy becomes available economic opinions change.
Unfortunately, borrowers – through higher mortgage repayments – bear the brunt of the tackle to curb inflation. Here are our tips for borrowers during this time:
Steps to take:
- Review your loan account to check what your current amount repayment is
- Consider what your repayments could be if rates continue to rise. Use the home loan repayment calculators on our website or contact us and we’ll crunch the numbers for you.
- Review your household budget to ensure you can manage higher loan repayments.
- If you haven’t spoken with us recently about your rate, call us. We’ll scan the market to check it’s still competitive and or identify whether there may be an opportunity to negotiate a better rate with your existing lender.
- If you are on a fixed rate, contact us to discuss what your options are when your fixed rate expires.
- If you are concerned about higher repayments, please contact us to discuss options.
This article was published on March 9th 2023. It is intended for general information purposes only. It has not taken any individual personal circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. You should should seek qualified advice before making decisions. Please talk to your mortgage broker or Court Financial Services about your specific situation.
