Metallica fans are probably, singing “Gripping your pillow tight.” When I’m asked, “What do you think is going to happen with interest rates?” Sleep with one eye open is the best answer I have.
Even after the pause in rises in April, there are still some drums beating for a May rise.
There are roughly 800,000 fixed rate mortgages that are in the low 2s or high 1s that are going to roll over to a variable rate this year. That’s when the interest rate rises will actually bite, bringing everyone on to parity. Many of them will be in for a shock.
This doesn’t necessarily mean housing prices will fall off a cliff either with 600,000 to 800,000 new immigrants proposed to arrive in Australia over the next 2 years – these are skilled professionals. IT workers, medical workers etc. They are coming here to settle and create a better life. They will be buying houses for their families. Maybe not immediately but a lot of them will at some point after they arrive.
I read a lot of different opinions on what will happen next to try and get an idea of what might happen rather than trying to predict the future. Usually, when everyone agrees, that’s what happens and right now… everyone seems to agree that we will get one more rate rise and then the RBA will pause. So I expect that too.
Then… it’s just a guess, I mean look at the spectrum in forecasts we see just from the Big 4 Bank’s economics departments”
Westpac thinks we will see 7 rate cuts (1.75%) 2024 and 2025 but ANZ thinks we won’t see a rate cut until November 2024.
Odds are, something in the middle will happen. The RBA is primarily trying to get inflation back to 2-3% as quickly as they can while at the same time, hopefully not destroying the economy.
I think we will have a clearer picture of what to expect in the next 2-3 years in a couple of months, once we know the RBA has confirmed a pause in rises.
But bad inflation data could throw all of that out the window. Remember there wasn’t meant to be a rate rise until this year. That’s why I caution you about sleeping with one eye open.
If you are thinking about refinancing, it’s probably smart to get in touch about refinancing before that hits. Not all interest rates have risen equally – some have risen more than others and lenders tend to offer better discounts to new customers as opposed to existing customers.
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