Liz Barter Homeloans

What does the cash rate hike mean for me?

With the RBA’s cash rate hike last week there is a little bit of panic in the air. In times like this it’s important to get educated, understand the basics, and then make smart decisions. Let’s simplify this, and then we hope you can make an informed decision on what your next moves will be.

What’s happening here?

Inflation is getting ahead of the cash rate. The reserve bank has delivered the first increase in 10 years and they have done this to get a hold of the inflation that’s breaking out through the economy. i.e. increased prices to petrol, food, rent and general expenses. It’s a bad thing for the economy to have too much inflation. Inflation is getting ahead of the target band so the central bank is moving quickly to stamp out that inflation.

The principal is simple … it’s taking cash out of the family budget and putting it into the mortgage, so there is less money going around the economy and less pressure to drive prices up. The price rises aren’t being driven just by demand, there are also supply issues because of overseas conflict and the pandemic. This creates the perfect inflation storm and this current rate rise is at an emergency level so that inflation within the economy can be relaxed.

What does it mean for me?

Stop spending money and put it in your mortgage! As rates increase (anticipating they will reach pre-covid levels sooner rather than later!), its important you consider what your budget and lifestyle looks like moving forward. Have you got a savings buffer? Can you start to save in certain places? When was the last time you reviewed your rate?

Do I fix or stay variable?

Loan products are changing day by day and it’s important to consider what is right for you. When our clients are considering a fixed or variable loan often they will consider:
– Am I likely to make extra repayments?
– Do I want certainty for the next few years? – i.e. Will I be applying for maternity leave?
– Can I afford a big change to my variable rate?
– Are there other loan features that are important? i.e. redraw facility, offset, etc. Download this free PDF to learn more about different loan features and what they mean. 
– Make sure you understand what your numbers look like after your current fixed period expires

How can we help you?

We don’t have a crystal ball (though we wish we did!), but we can help you navigate the current environment, consider what loan products are right for you and help you understand both fixed and variable loans. Contact us today if you need help with your home loan.