What the RBA do to the cash rate and, in turn, to your mortgage interest rate (if passed on by your lender) can be enough to set your blood pressure going. So what does the RBA have in store for 2017? As always it will depend on who you ask but the general consensus is they will rise through-out 2017. It is, however, unlikely to herald the return of sharp, and steep, monetary policy tightening cycle (as in 2008) from the RBA according to David Scutt from Business Insider Australia. Prior to the devastating GFC cash rates were 7.25%, yes 7.25% which sounds unbelievable now.
With household debt at a record level high many house owners religiously tune into the RBA announcement every month to see how the decision will affect their monthly budget. With many families living close to the line, many calling pay day “allocation day” instead, a difference of $150 a month can have a knock on effect for the rest of their budget.
According to Julia Corderoy (news.com.au) 1 in 5 Aussies will experience “housing stress” if interest rates go up by 0.5%. Our own government have agreed that the impact of higher housing costs is most strongly felt by lower-income groups, particularly low-income renters for whom home ownership is increasingly out of reach, thanks Yates & Milligan for confirming this. Many experts note that the only way to manage expected interest rate hikes (mostly towards the end of 2017) is for the government to get involved and offer some great policies to prevent a catastrophe.
So who is in the “know” when it comes to interest rate rises? The big 4 banks would be my bet and what has their faxed rate mortgage % in recent months? It’s gradually gone up, bit by bit, indicating that more variable rises are in the forecast for the year.
Is there a way for home buyers to protect themselves in the year to come? Yes ofcourse, there are a couple of things they can do: Firstly re-mortgage, go find a great rate, with an smaller buyer (Yes I mean us) But seriously re-financing is a great idea. Secondly, have a hard think about a fixed rate but know the risks involved (paying more for peace of mine) and thirdly go onto interest only for 12 months but continue to pay the same as you were paying before, this will give you a buffer should there be a hike rise.