Welcome Welcome Welcome to 2023
Holidays and summer fun times are over, and it is back to work, and for the Reserve Bank that can only mean one thing…rates are on the way up once more.
No doubt they saw our spending over the Black Friday, Boxing Day, and January sales and thought they need to tap the brakes on the economy just a few more times.
For many of our clients this year will see your cheap fixed rate coming to an end. As we have said in previous newsletters, we are endeavouring to reach out to all our clients who will experience this to look at obtaining a better rate or refinancing to another lender. We have contacted many of you so far and either completed or are ongoing in this process.
We are noticing that most lenders are very keen to keep their existing customers and are offering good incentives to stay put. If we find your lender is not being competitive, we will endeavour to contact you early enough in the process to allow time for us to refinance your loan to another lender if needed.
We are here for you to work through this and achieve a suitable outcome. Please reach out to us and not the bank directly if your fixed rate is expiring or you are starting to feel anxious about this.
As the interest rates increase, we are seeing a drop in home values across the country and for Canberra this drop according to Corelogic has been 8.6%, however this is offset by the 38.3% increase over the boom period of the previous two years, so it is not as bad as it seems.
Likewise with interest rates, the average interest rate in the years prior to the pandemic were in the high 5% to 6% and then dropped to record lows at 2% – 3% over the past few years. Current rates are back to where they were pre-pandemic. There are plenty of experts who attempt to predict the future, time will tell how accurate their foresight is.
Along with their predictions, the media will keep the sensationalism going with how much house prices are dropping, and how much the cash rate is going up, and looking for villains to blame, but we know this is just the economic cycle and calmness, not panic is what is called for.
The takeaway from this, is that the current interest rate level is still on the lower side of the average and will rise some more this year and all of us with a home loan need to accept this and adjust our household budgets accordingly. House prices will level out over time, and there are many factors that will contribute to this, that will see them settle down.
We are out of the unprecedented times and getting back to the previous normal times with a mix of the new positives we enjoyed, like working from home, as we take on another year.
At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 3.35 per cent. It also increased the interest rate on Exchange Settlement balances by 25 basis points to 3.25 per cent.
Global inflation remains very high. It is, however, moderating in response to lower energy prices, the resolution of supply-chain problems and the tightening of monetary policy. It will be some time, though, before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next.
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.