Over the past year, the home loan market has been rocked by a series of rate hikes.
The once historic low cash rate of 0.10 per cent, held for many months throughout the pandemic, now sits at 4.1 per cent. The highest we’ve seen in more than 10 years.
The Reserve Bank of Australia’s (RBA) primary objective is to rein inflation back into its target range of two to three per cent. Recorded at six per cent for the June 2023 quarter, inflation is moving in a downward trajectory but is still too high for the RBA’s comfort.
So, will the cash rate go up again? And more importantly, when can we expect it to come back down?
You may be relieved to hear we are just about at the apex of the rate hikes. CBA, Westpac and ANZ anticipate the cash rate will remain on hold at 4.1 per cent for an extended period. NAB predicts we may see one more increase this cycle, taking the target to a peak of 4.35 per cent by December 2023.
According to economists’ forecasts, here’s how they expect the cash rate to move:
CBA: Next cut March 2024, falling to 3.1 per cent by November 2024
Westpac: Next cut in August 2024, falling to 2.6 per cent by November 2025
NAB: Next cut in August 2024, falling to 3.1 per cent by February 2025
ANZ: Next cut in November 2024, falling to 3.85 per cent by November 2024
If inflation continues at its current downward trend, we can expect to see some much-needed relief next year – at what point in the year is the bigger question. Of course, it’s important to bear in mind that even the country’s top economists don’t hold a crystal ball, and predictions can change from time to time. What they do currently agree on is that the RBA’s moves are working.
Sweet news to all our ears, indeed. If you, like many, are feeling the sting of rising mortgage repayments, here are some ways you could take some control until that beautiful rate-cut day comes. Â
Refinancing
Refinancing to a different lender could provide your budget with essential relief during a period of increasing interest rates. Lenders may present their most attractive interest rates to new customers as an incentive for you to sign up. A mortgage broker can assist with scouring the market for different options, beyond the rates available with your current bank.
Make extra repayments
If you’re in a position to do so, one of the easiest ways to chip away at your principal is to make extra repayments. Even smaller extra repayments of $50 a week could go a long way over time by reducing the interest you are paying each month. Changing your payment frequency can help, too. For example, shifting from monthly to fortnightly repayments means you could pay an extra month’s worth of repayments in the year, because there are 12 months in the year and 26 fortnights.
Offset account
If you have savings and don’t currently have an offset feature on your home loan, you could be missing out on reduced mortgage repayments. Depositing funds into an offset account effectively lowers the interest amount imposed by the lender. For instance, for a $600,000 home loan with $50,000 held in its offset account, the interest would be calculated based on a revised balance of $550,000.
Remember not every option will be applicable to your individual financial circumstances and budget. It’s best to speak to a specialist mortgage broker for best advice.
Legal Home Loans specialise in financing for legal professionals of all levels. We have access to all major lenders and private banks and will help you select a loan that best suits your unique situation. Plus, if you’re a member of the Queensland Law Society, you receive $500 cash back upon loan settlement.*
Want to explore the right option for you? Get in touch with our lending experts today.
Disclaimer: This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed before acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances. AMJ Financial Pty Limited trading as Legal Home Loans Credit Representative Number 500773 is authorised under Australian Credit License Number 389328. Copyright © 2023
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