The reserve bank have finally done it, they have increased the nation’s cash rate by 25 basis point to .35 per cent
This is the first increase we have seen in more than 11 years. To help put that in context, the last interest rate rise was in 2010, just think about that, what were you doing in 2010? It was a long time ago.
Obviously, the biggest fall out from this is that our mortgage repayments will increase and our borrowing capacity will shrink. It was reported by 9news that the average mortgage of $500,000 will increase by $65 a month. This will hurt a lot of Australians, especially when understanding that the increases will continue over the coming 18 months.
There are a lot of predictions in the market place at the moment with one of the biggest being that the RBA will reach 3 point something per cent in the next 12 months. Again, this is quite frightening for most Australians knowing that their month to month expenses are about to rise.
The thing that the media continues to forget when reporting on the above news is that Australians are incredibly resilient people. We need to remember what the great Australian dream is; we need to remember that Australians have worked hard to buy their home and I don’t believe any of us will give up the dream because our expenses are growing. 2020 was challenging for families and I think we learnt a lot about how we manage our money because we all got a huge shock. We now know that we can cut back on certain luxuries if the choice is ‘smashed avo’ or keeping my home.
My feeling is that the confidence in our market place will continue for a little while longer. I am slightly more optimistic than others but my confidence has been built by the feedback we are getting from the sales offices. Enquiries are still strong, genuine buyers are still in the market, but the most exciting part is that the investor is coming back into the market in a big way.
It is an interesting time that I would argue is completely unprecedented. In 1989 interests rates hit an all time high of 17.5% and I have been told that the market simply stopped. At that time unemployment was sitting at 7.2% which rose to 12.1% in late 1992. To me, this is completely shocking, but we cannot compare that disastrous situation with what we have today. Today, money is still cheap, all be it, it is on the move up, but unemployment is still sitting circa 4%. But not only that, there are a lot of genuine buyers in the market and the sales continue to happen. With migration about to re commence we may find ourselves with a shortage of housing to accommodate our new arrivals.
I am excited to see what is ahead of us.
