The Reserve Bank of Australia has an interest rate rise for the first time in over a decade in response to soaring inflation.
This rise in inflation largely reflects global factors. Currently there are ongoing supply chain disruptions due to COVID-19 (especially in China) and a war in Ukraine. Domestic capacity constraints are also playing an increasing role. Inflation pressures have broadened - now firms are more prepared to pass on higher costs to consumers.
What does this mean for homeowners?
To combat higher inflation the Reserve Bank raises interest rates to restrict the money supply. Put simply, it makes money more expensive. For people with a variable mortgage, this means repayments will go up. For example, on a variable home loan size of $500,000, the new rates will reflect in increased monthly repayments by $105.
Despite ongoing uncertainties about the economy, Beyond Broking has a positive outlook for economic growth in Australia. We expect the RBA to apply a balanced approach to rising interest rates, and the Board will do what it takes to ensure that inflation in Australia returns to target over time.
How to prepare for an interest rate rise
Borrowers on variable rates can prepare for rising interest rates by reviewing their mortgages. You can check to see if your lender is offering a better rate for new customers and ask to receive the lower rate. If not, it could be time to switch to a lender with more flexibility. The paperwork can be time-consuming, but if you can save thousands on repayments, it’s worth the effort and we can help alleviate the burden.
Our team specialises in home loans and we can find deals across many lenders that may not even be advertised. We believe we can find value in the market as banks still compete for market share, so it’s worth getting in touch to review your options.