Yesterday, the Reserve Bank of Australia announced the third cash rate rise in as many months. Whilst this seems a lot, this is the first of any rate rises we’ve seen since October 2011 when the rate started dropping from 4.75%.
The cash rate is currently sitting at 1.35% and while the actual interest rate charged by lenders is higher, the interest we’re paying is still incredibly low.
I know times, wages and housing prices were very different, but in 1990 the cash rate was at 17.50% with mortgage interest rates around 20%. This seems unbelievable, doesn’t it!
The function of the Reserve Bank is to control our economy to protect us from recession and the impact of both local and global influences on our cost of living. The changes they make to the cash rate are designed as a buffer against those influences.
By increasing the rate, they are responding to rising inflation globally due to the pandemic, the war in Ukraine and its impact on energy and agricultural commodities, and locally, the floods, household spending and housing prices.
A good mortgage broker would have taken steps to ensure that you were OK with a change in interest rates at the time you took out your home loan. Hopefully, this is the case and you’re not being put under too much financial strain with these increases.
If you are stressed or concerned, please get in touch and we can discuss your options to refinance.
If you’re in the market to buy a new home, keep your eye on property prices in your target location. In many areas, prices are correcting and you may be able to negotiate a better price than you would have a few months ago.
If we can help, we’re just a phone call or an email away.
