Inflation was slightly higher in December than expected. Inflation kicked off with oil price shocks caused by the Russia/Ukraine conflict, so rate rises did feel a “bit unfair” to many.
However, in December one of the single biggest contributors was travel and holidays. After two years of disappointment, we all spent whatever it took to have a holiday (and so we should). But that is 100% discretionary spending, on us. Too much money chasing too few goods. That always has a bad end – with the price of everything going up. Inflation kills wealth and inflation has to be controlled.
We can forget any thought of a Reserve Bank pause tomorrow.
Official Interest rates rose 3% last year – but only for some.
Only one third of Australians have a home loan.
And one third of those are fixed (and they mature in 2023 and early 2024).
The Reserve Bank knows this – they know that a large portion of Australia is not yet affected by their rate rises (Aust Fin Review Nov 2022) – they have modelled it!
The Reserve Bank also know they have two (maybe three rate rises) left – because more than that and they will create more overall damage than overall benefit.
So they (and the media who speculate) will need to do MUCH MORE blather – talk, than action.
In the late 80’s the Reserve Bank didn’t announce rate rises and ended up having to go much further than they needed to (The Australian Feb 6th).
All the “talk” is of 2 to 4 more rate rises. Let’s settle on the two that are almost certainly “baked in” for Feb and Mar – after which the Reserve Bank will likely pause and wait for the March Quarter inflation figures.
What is your role
- Plan, as I have been saying, for a peak home loan rate of 5.5% (refer to my calculator for what this means for you). Click Here
What is my role
- To ensure that you have the rate being offered to new to bank customers (or as close to it as I can get).
On house price? Many people are hanging off buying, waiting for a price correction. The thing that causes forced sales is loss of employment – so while unemployment stays at 4% and under, that isn’t going to happen in large numbers.
The most likely scenario for 2023 is a plateau in price (unless the Reserve Bank gets it wrong).
It took two years (2020 and 2021) for Covid to wash through with all the govt stimulus (worldwide).
It will take two years (2022 and 2023) for that to unwind.
Welcome to a year of mostly blather on interest rates.
As always if you’d like advice tailored to your own specific circumstances, call or email me anytime – it’s what i’m here for.
Ask Alan – 0411 601 459, alan.heath@askalanheath.com.au
Mortgage Broker in Brisbane, QLD, servicing nationwide.