The Reserve Bank of Australia has announced an increase in the cash rate by 25 basis points to 3.35%. This decision was made in the hope that it will eventually return inflation to the target.
Background
With global inflation remaining extremely high and low growth predicted for this year and the next, the RBA Governor Philip Lowe explained that “the board is seeking to return inflation to the 2–3 per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains narrow”. While the RBA’s decision was made with good intentions, it has caused concern for many homeowners, as banks are expected to pass on the increase to borrowers in the coming weeks.
Steps you can take for mortgage holders
If you have a mortgage, it’s essential to start planning now to stay ahead of your mortgage repayments. One effective strategy is to review your current mortgage terms to determine when your fixed term ends and what the new terms will be. This will provide you with an idea of when your repayments could increase and by how much. If you have a fixed-rate mortgage, especially a low fixed rate, it’s crucial to prepare for a potentially significant increase in your repayments when your fixed term expires.
Another crucial step is to assess your current budget by analyzing your income and expenses. If you realize that you could potentially struggle to make the higher payments, it could be wise to seek financial advice. Taking proactive steps and acting now to stay ahead of the higher rates is crucial. If you are currently working with a financial adviser or considering it, now would be a crucial time to do so.
Significant impacts
One of the most significant impacts of the RBA’s decision to increase the cash rate is the impact it will have on mortgage repayments. It’s expected that the average interest rate for residential home loans, which ranges from 4.6% to 5%, will increase by an additional 0.25%. For homeowners with a variable rate mortgage, this will result in higher mortgage repayments. If you have a variable rate mortgage, it’s essential to prepare for the possibility of increased mortgage repayments in the coming weeks.
Strategies that can help mortgage holders
One strategy that can help you prepare for the possibility of increased mortgage repayments is to make additional payments on your mortgage. This can help you reduce the principal amount owed and potentially reduce the impact of the interest rate increase on your mortgage repayments. If you have an offset account, you could also consider using this to reduce the interest charged on your mortgage.
For homeowners who have a fixed-rate mortgage, it’s important to review your current mortgage terms to determine when your fixed term ends and what the new terms will be. This will provide you with an idea of when your repayments could increase and by how much. If you realize that you could potentially struggle to make the higher payments, it could be wise to seek financial advice. Taking proactive steps and acting now to stay ahead of the higher rates is crucial.
For property investors, the RBA’s decision to increase the cash rate could result in a decrease in property values. This is because higher mortgage repayments could make it harder for potential buyers to afford property, resulting in a decrease in demand. It’s essential for property investors to keep a close eye on the property market and make necessary adjustments to their investment strategy.
In conclusion, the RBA’s decision to increase the cash rate will have significant impacts on mortgage repayments.
Vogue Advisory Group – helping you understand the impact the RBA cash rate has on your financial situation
As the Reserve Bank of Australia (RBA) announces an increase in the cash rate by 25 basis points to 3.35%, many individuals are wondering what impact this will have on their financial situation. This is where the expertise of financial advisors at Vogue Advisory Group can come in handy.
Our team of experienced financial professionals can help you understand the impact of the RBA cash rate on your finances. We can provide you with the necessary guidance and support to make informed decisions about your financial goals and strategies.
Our financial advisors can help you to review your current financial situation, including your budget, savings, investments, and debts. We can also help you to determine the potential impact of the RBA cash rate increase on your mortgage, savings, and investments.
We can work with you to create a plan to manage any potential increases in mortgage repayments and suggest ways to mitigate any negative impact on your savings and investments.
At Vogue Advisory Group, we understand that every individual has unique financial goals and circumstances. Our financial advisors will take the time to understand your specific situation and develop a tailored strategy that meets your needs and goals.
We pride ourselves on providing transparent and easy-to-understand advice that empowers you to make informed decisions about your finances. We are committed to working closely with our clients to help them achieve their financial goals and objectives.
If you want to understand the impact of the RBA cash rate on your financial situation, reach out to Vogue Advisory Group today. Our team of dedicated financial advisors is here to help you navigate this change and make informed decisions about your financial future.
