Will interest rates rise?
The Reserve Bank of Australia has announced in its March 2022 meeting that they are not looking to increase the cash rate until inflation is sustainably in the 2% to 3% per cent target range. However, many economists agree that we will see interest rate hikes as a certainty for 2022.
The cash rate has remained unchanged at 0.10% for the 15th month in a row, and many financial institutions have released their forecasted predictions. CBA recently shifted its forecasts for the RBA to increase interest rates as early as June 2022.
The current CBA predictions show an increase by 15 basis points in June 2022, increasing the cash rate to 0.25%. A further two 25 basis point increases in the third and fourth quarter will see 2022 end with the cash rate at 1.0% and continuing to grow in 2023, hitting 1.25%.
Mr Gareth Aird, an economist for the CBA, announced that after the cash rate hits 1.25% in 2023, we can expect a pause as approximately $500 billion worth of low rate fixed mortgages is scheduled to expire. With these loans expiring, it's predicted that these purchasers will be refinancing their loans at much higher interest rates, which will significantly impact their household finances.
So What Can You Expect?
Generally, interest rates increases are good news for people with savings or term deposits as they will now provide higher returns. Unfortunately, a rise in interest rates for many Australians will also mean higher loan repayments and less disposable income, forcing them to tighten their belts.
Interest rate increases impact families and small businesses, and the increased debt repayments make life challenging and expensive. The lower interest rates we have enjoyed over the past 15 months have been a nice respite creating not only an opportunity for many to get ahead financially but to promote spending to keep the economy turning.
What can you do?
When reviewing your finances, make sure you look at how interest rates are tracking. With the current economic environment and your circumstances, you may need to build a buffer for any increases that might affect your repayments.
I would suggest contacting your broker or booking a free consultation with a Club approved broker as it may also be worth looking at consolidating your debts and renegotiating your current interest rates to protect yourself from future increases.
If you have any questions or would like to speak to a mortgage broker, don't hesitate to get in touch with email@example.com or directly contact your Branch Manager.
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