Welcome to this month’s newsletter for March 2022. We thought this was going to be the year of getting back to normal after fires, floods, and pandemics and we could move on with hope and joy for the future. Then someone has to got and upset the applecart which sends Europe to the brink of war and financial markets suffer as a consequence.
The Reserve Bank has kept the cash rate at the same level again this month, however with the Ukrainian invasion, this adds more uncertainty to the world and Australia’s financial situation. We are already beginning to see increases in fuel and foodcosts, and as inflation increases, the Reserve Bank will want to increase the cash rate to keep it in check.
If this occurs, then we may be seeing the end of the cheap home loan for a while. As the cash rate is increased and home loan interest rates follow there may be less people looking for a new home as they do not want the extra financial burden of a larger mortgage, hand in hand with inflationary effects on household essentials.
This may see people who are looking to upgrade their home stay put for a while to see how they cope with less money in the family budget each week as their home loan Increase payments, along with food, fuel, and other services.
The impact for new home buyers is a bit of paradox. As interest rates increase, they may be cautious about entering the housing market as high interest rates are a complete unknown to the younger generations. Conversely the increase in interest rates may see housing prices stabilise or even drop as there are less people looking to buy homes which may bring homes into their price range.
The four major banks all predict that interest rates will increase in the second half of this year to combat increasing inflation, and we are already seeing increases in the fixed rate for home loans.
Recent APRA data shows the average borrower is almost four years ahead on their home loan repayments. However, that doesn’t mean every borrower will be able to take these rate hikes in their stride. Now is the time to prepare for future hikes by getting ahead on repayments now while rates are still low. The lower your loan size when rates do rise, the less pain you will feel.
Until next month, stay healthy and safe, and let’s hope we see the end of these ongoing calamities in the very near future.
|
|
|
|
The information provided in this newsletter is general in nature and does not take into account your personal circumstances, needs, objectives or financial situation. This information does not constitute financial advice. Before acting on any information in this newsletter, you should consider its appropriateness in relation to your personal situation.
