RBA Rises Rates for The 9th Time in a Row

Trying2SaveABuck on 07/02/2023 - 15:04
Last edited 07/02/2023 - 15:54

The RBA have announced its 9th consecutive rate rise in a row
https://www.news.com.au/finance/economy/interest-rates/rba-i…

Interest rates a ~4x higher then they were pre-pandemic in December 2019 the cash rate was 0.75% it now is 3.35%

We have about 1/3 of home loans coming of 'fix terms' this year meaning the 'actual' affect of the rate rises have not be felt but a lot of borrowers

now before the Karens post
a. in 1990 interest rates we 21%
or
b. you should of seen this coming

no one cares you paid 21% on your $30,000 home loan

literally no one and i mean no one could have seen this level of interest rate hiking happen in such a short period of time this is history making speed rates are rising - keep in mind the high inflation is also hurting borrows so it is a double hit

of course we need to combat inflation but im posting to see how this will affect people who are 'borrowers' like myself - i know a few people that are 'really' feeling the pinch and wanted to say there is support out there via financial stress hotline and you can contact your lender for support regarding your situation if you are finding yourself in trouble

Poll Options

  • 496
    Interest Rates have me worried
  • 357
    Interest Rates dont have me worried
  • 278
    I dont have a loan
Financial

Related Stores

Reserve Bank of Australia
Reserve Bank of Australia

Comments

      • Thatbargainhunter on 07/02/2023 - 18:38
        +22

        You mean like negative gearing….

        Exactly.

        • [Deactivated] on 09/02/2023 - 08:29
          +4

          No, only the 'stimulus' that helps the poor and small business. Rich people deserve tax cuts

        • berry580 on 12/02/2023 - 00:18

          So business should pay rate based on Gross income as opposed to net profit before tax as well?

      • BluebirdV on 09/02/2023 - 12:58

        And people able to access super to buy property.

        • stringbean402 on 09/02/2023 - 20:55
          +4

          Sounds like a great idea until suddenly pretty much EVERYONE is now able to enter the property market at once and supply does not change.

          Doesn’t take a genius to figure out what happens to prices.

          There needs to be a decent barrier of entry of actually having to save REAL wealth and sacrifice spending in the mean time.

          I’m not opposed to a super co-investment model, say 70% owner equity, 30% super equity towards deposits with super to be repaid in full including the capital gains % should the asset be sold. This helps preserve the return generating value that was removed from super.

          If you let people use their entire super to form a full deposit for entry to the property market we’ll just end up with a generation of people with no retirement savings. The whole system goes down the drain with folks refinancing their mortgages to access equity and buy fancy cars and holidays.

          There is 3.3 trillions dollars of super assets in Australia, if you suddenly release even a small percentage of this into the economy it has a similar effect to just printing currency, there is little value attached to it by most people because super is a ‘future’ problem.

          Just look at how many people accessed it during covid and pissed it away on frivolous spending, it injected shitloads of money into the economy the government didn’t have cough up so served it’s purpose, JB Hifi did very well out of it. But this was yet another inflationary pressure.

          You can’t make a previously inaccessible pool of wealth suddenly accessible and not expect economic consequences.

          At a minimum if we went down this path there needs to be a % cap of how much of your super you can use, it needs to be matched with real capital, and it needs to be paid back when the asset is sold.

    • payless69 on 07/02/2023 - 17:44
      +4

      Keating used to say: If I do not correct what my brother with his bird name did then we will be a Banana Republic!

    • acersaurus on 09/02/2023 - 13:13

      Or rather than targeting young families, how about putting the family home in the assets test for the aged pension - if it is over a certain value e.g $1 million.

    • Rumbaar on 09/02/2023 - 19:10
      +7

      Why target coporate greed and record profits, when you can target the poorest members of society.

  • iNeed2Pee on 07/02/2023 - 16:14
    +19

    Can’t wait until it reaches 17% so I can use that excuse like the rest of society who purchased a home in the late 80s. That’s all I hear from that generation.

    • lachhelix on 07/02/2023 - 21:14
      +1

      "back in my day" etc etc

    • reactor-au on 08/02/2023 - 08:43
      +2

      17% was less of an issue before property doubled every 10 years since then

      • xordis on 09/02/2023 - 10:51
        +2

        You can go back to the 70's and watch house prices double every ten years.
        It's not a thing since the 90's.

        And it's possibly earlier. That is all the ABS has on it's long term stats (that I have access to)

    • Brianqpr on 08/02/2023 - 16:59
      +6

      Its been demonstarted that 6% today has the same impact that 17% did back then due to much larger loan sizes. So its already as tough as it was then with a much bigger deposit needed.

    • mrvaluepack on 08/02/2023 - 18:13
      +2

      And home prices will be just 3 times the average annual salary.

  • tsunamisurfer on 07/02/2023 - 16:17
    +31

    literally no one and i mean no one could have seen this level of interest rate hiking happen in such a short period of time this is history making speed rates are rising - keep in mind the high inflation is also hurting borrows so it is a double hit

    You are in a 25 - 30 year commitment.

    At some point the interest rates are going to move back towards the mean. Borrowers since the GFC have benefitted from record low interest rates and should have been smashing their loans to be way ahead of minimum repayments.

    It doesn't matter whether its happening in a short time, everyone should know it was going to come at some point.

    You really shouldn't be feeling any pinch right now because this around 6-7% is what you should have been budgeting for from the start.

    • Debt Free on 07/02/2023 - 17:08
      +4

      Yes I agree. A percentage of at least 5% higher interest rates should have been factored in before taking on a home loan- either that or be ready to sell up fast.

      • Odin on 08/02/2023 - 10:58
        +2

        Uh no.

        The standard approach, that it still considered good practice today is to factor in a 2% rate rise over your proposed rate.

        This revisionist history where apparently now it's 5% is complete bullshit.

        It's also ludicrous. A rise of such a large amount is unsustainable and will destroy the economy

        • Debt Free on 08/02/2023 - 15:55

          it is bare minimum one should factor in when money has been given away for many years now for free to fill the pockets of the greedy and penniless at the expense of the hard work long saving long suffering

        • Mrgreenz on 08/02/2023 - 15:56
          +7

          Google: "RBA historical intrest rates" click images

          Look at chart. Point where 2% buffer makes sense

    • Brianqpr on 08/02/2023 - 17:01
      +4

      Even the banks weren't required to allow for interest rates that high at the time a lot of these loans were written (they assessed based on a 2.5% increase) so I'm not sure how you expect the average customer to be doing this.

      • tomfool on 08/02/2023 - 17:21

        COVID came along and the rates dropped to pretty much zero. So although the 2.5% increase may be true under normal circumstances, these were not normal. I would have thought that most people would have factored this into their borrowing capacity and adjusted. Those on fixed rates have had 12 months notice and hopefully have budgeted to get through this. A rate of 3.5- 4.5 % is pretty much where the RBA would be under a healthy economy.

        • Brianqpr on 08/02/2023 - 23:17

          They've had a bit over 6 months notice and all sorts of different forecasts for where it's going.

      • tsunamisurfer on 08/02/2023 - 23:16

        You don't use the banks as your guide to affordability and serviceability.

        You rely on what data is available, and add some risk mitigation by adding on some buffers in your calculations.

        I do not think adding 2% on top of historic lows of 1.5% as your 30 year average is enough and sets a borrower up for danger when those up limits get pushed.

        If you had planned for 7% you would still be OK after another 3 quarter percent rises.

      • whorishmouth on 10/02/2023 - 14:43

        Yep, can confirm CBA used 2.5% stress test on top of current rate, just going thru re-financing process now and I asked them.

    • BartholemewH on 08/02/2023 - 22:21
      +1

      100%. Whether looking at changing PPOR or investing, I have always used 7% as the best case scenario when calculating my ability to pay.

      • Daniel Plainview on 10/02/2023 - 15:14

        And is safe to say that 7% was used when rates were not literally at the lowest point they'd ever been seen - thus making it even more conservative and sensible.

        2.5% from the all-time lowest as an indicator of anything over a 30yr loan is very questionable - that said this isn't on the bank is on the lendee.

        • acersaurus on 10/02/2023 - 15:40

          It's on the bank and the lendee I'd say, and the regulators.

          We have seen what can happen when the stability of the financial system is left to the assumption that lendees will accurately forecast their own future capacity to pay (sub prime mortgage crisis in the US).

          • Daniel Plainview on 10/02/2023 - 15:49

            @acersaurus: Regulators want to protect people from themselves, banks want the loans to go the full terms (as foreclosure sales reduce profits vs full term loans) & damages their PR and lendees should want to have a managable that will not be an albatross around their neck within a few years of it's 30yr length.

            So you would think between all three a pretty good system would be in place. All that said lendees really should be far and away the ones going over stuff with fine tooth combs, they have the most to lose by far. Both banks and regulators will be just fine regardless.

            Not sure if the sub prime mortgage crisis was entirely a fair comparison but I do agree its an extreme example of home people will often be their own worst enemies with immense financial commitments.

            • acersaurus on 10/02/2023 - 16:18

              @Daniel Plainview: Subprime crisis is not an equivalent situation but does show that it is in societies interests to regulate borrowing to sustainable amounts, which is not so much about being paternalistic to individuals but is for ensuring the overall health of the financial system.

              Yes it is in the interests of the individual to forecast their capacity to pay and to face changing circumstances, though history suggests a lot won't. I think a lot leave it to the banks.

              • Daniel Plainview on 10/02/2023 - 16:55
                +1

                @acersaurus: It was your example and I went with it! :-/

                I don't want to go off on a tangent BUT the crux of the sub-prime crisis was that tens of thousands of these mortgages were packaged into hybrid financial derivatives and then onsold & repackaged many times with ratings agencies in cahoots to make them seem super safe for retail investors etc.

                A bunch of people losing their homes which is always terrible and carries huge social costs, but it would not have been the house of cards that it became on a global scale if not for the extra stuff done well after the very bodgy initial loans were made.

                Well logic says, the individual with the most to lose/greatest risk should take the greatest care - yet in 2023 folks still won't do this. Is this stupidity? Ignorance? Greed? Something else or all of the above?

                Agree, many feel the bank will take care of them - why I do not know but they do - the bank takes care of the bank…..you are very much a tertiary consideration and understandably so.

                • acersaurus on 10/02/2023 - 21:02

                  @Daniel Plainview: There were a number of causes to the sub prime crisis, but one of them is on the lendees - as it could not have occurred without massive amounts of lendees ignoring or not reading the terms of their loans or thinking about their future capacity to meet those terms. In different circumstances with a lack of oversight the same could happen if lendees don't pay attention en mass and then their ability to pay is compromised or interest rates rise sufficiently. I think there are various lessons for the whole world about regulation and oversight from the GFC, and some of them are about lendees.

                  A minority needed to take more care in Australia, but needing to and actually doing it are different things. Housing market circumstances have influenced people to gamble to some degree. Many thought it was rational behaviour to max out their borrowing capacity and buy the best house possible, as house prices have mostly been growing at a cracking pace since 1996 and for the better part of the last 25 years that strategy paid off. People paying attention to trends like that + basing key decisions in them is why there is a decent sized role for regulation/oversight.

  • CheapAddict on 07/02/2023 - 16:19
    +7

    I'm a little worried due to how aggressive the interest rates hikes are and we have not even seen most banks pass on all the rate changes lets alone the huge chunk of people who've not come off their fixed rates.

    It reminds of those impatient people who keep clicking on a button and not getting a response then to suddenly have the PC responds seconds later and all their work is screwed.

    But what do i know, its just my observation of the whole situation

    • Daniel Plainview on 08/02/2023 - 14:15

      It's been aggressive yes, but I do think it's been a confluence of several extreme factors. Going from alltime rates lows - to suddenly the highest inflation in several decades needed a firm hand. I think that they have used 25 basis point increases each time shows they were wanting signs of it's effect being desired - but they just didn't see any.

      It's really one of those classic Australian cycles, people borrow too much, as they can - and they insist on having more than they should now (as who wants to wait), rates rise, everyone under the sun is blamed except the loan applicant themselves, banks (who are under their corporate charters OBLIGED to make profit for their shareholders) are derided in media for daring to pass on rate increases. Rinse and repeat.

      I do wonder, while folks had these historically low rates - how many of them were paying either above and beyond their minimum loan repayments to get the principle down? A few smart cookies would have but I think we know why JB Hifi etc have also had record profits as folks were still only too happy to go down the discretionary spending path.

      Anyone else like Aesop's Fables?
      https://read.gov/aesop/052.html

      • 91rs on 08/02/2023 - 21:29

        Trying to blame the people borrowing unless they have really overly extended themselves (banks were quite conservative during covid) is a bit harsh, Australia is a sh!t market to buy in, everything is way overpriced for the low quality and there has been so much competition for housing for decades here now, they're buying in the worst of conditions, but if they don't they could easily waste 10 years waiting for nothing.
        If rates keep going lending will become harder, people can borrow less and well less doesn't get you anything in Australia.
        New loans for FHB'ers through covid were significantly harder to get through and took much longer than prior to covid.

        Decades of TV shows telling people that property is their path to a fortune created the stupid prices we see for rubbish properties is part of the issue.
        Housing has become a luxury item in Australia.

        Some people are cheering on these rises but the knock on if it keeps going and people can't pay their mortgage, bills, food etc is going to be far worse on society.
        Something that could take decades to undo that will screw so many Australians.
        But don't worry the boomers will be safe, they've already had it hard enough they shouldn't suffer through this too.

        • Daniel Plainview on 09/02/2023 - 09:06
          +1

          'Blame' is not really the word I'd use for it - ultimately, its about simple accountability for one's own personal finances.

          This can be expressed in some multi-paragraph rant - or just that succinctly. It's your loan, your property - just as in the eyes of the law - the lendee is 100% accountable for this unless.

          The reality is many people want rates higher as it benefits their financial structure - rather than it being any type of shadenfreude (though this does unfortunately exist too).

          Again if your mortgage is a 25-30yr loan and just a couple of years into it and several % higher you're already suffering financial stress from it - I would put it to you that something in the initial loan was excessive, likely borrowing too much and like it or not thats entirely on the lendee.

          • 91rs on 09/02/2023 - 11:08

            @Daniel Plainview: Agree with personal responsibility knowing what can and can't be serviced etc. Not enough people have taken that seriously enough given the ongoing promises of forever increases in property value so they can sell up and move on and do it again with something bigger.

            But we're getting a really bad deal in Australia, mental house prices and the inability to fix loans for the long term to improve affordability & stability.

            This confuses the sh!t out of my American and European friends, they see it as very anti-consumer as they can (and did) lock in mortgages for 15-30 years fixed at low rates.
            They know exactly how much it's going to cost them in 10 or 20 years in repayments and can plan life around that much easier than we can here, a house isn't a luxury item to them it's a necessity and treated as such.

            Where as us here? Well the banks are making plenty of money from us and that's all that matters it seems.

            • Daniel Plainview on 09/02/2023 - 11:20

              @91rs: Agree - but if we cut to the bone on it - thats a combo of ignorance and greed, and thats never going to end well for atleast one party to the deal.

              I'm not familiar with mortgage products in the rest of the world - a quick check shows in the US they're freely available, not sure about elsewhere.

              As with many things though it's hard to compare apples with apples - as this is just part of the cost of borrowing to purchase real estate. And so the end financial outcome will be affected by a myraid of factors. e.g in the US you pay capital gains tax when you sell the family home.

              Is it better there or here? I'd imagine it'd vary for many folks and is hard to have all the best features in one market as something has to 'give'.

              I don't pretend to really know the Australian mortgage market - so why those loans aren't available surely is down to lack of demand - as if people really wanted them it's just maths for the banks to create some, very little actual cost. I'd imagine it's an Occams razor situation where folks just aren't asking for them as there's every other type of financial product out there just as long as you're willing to pay the price.

  • Stalker on 07/02/2023 - 16:27
    +4

    This month's outcome was pretty expected. It's the overt threat / warning of there still being more rises to come that is of most interest. Although, they were not exactly going to come out and say 'Ok, that's it - we are done now'. LOL :p

    • dcep on 07/02/2023 - 16:51
      +1

      Haa , but 2 years ago they came out and said no rates hike until 2024.

      • Stalker on 07/02/2023 - 18:32
        +2

        Yup - Which was a massive error of judgment on their part. Learned their lesson I hope. ;)

      • Debt Free on 07/02/2023 - 20:52

        which is why they did not increase rates more than a year ago when they really should have, and are now soooooo slow in doing what they are trained to do and must do— put rates up by another 2% at least and ASAP

        • BartholemewH on 08/02/2023 - 22:24
          +5

          Username checks out!

        • [Deactivated] on 09/02/2023 - 10:08
          +1

          Exactly.

          If raising interest rates is intended to slow inflation - well they are still too low, still contributing to inflation.

          "The well-respected Taylor rule (named after my Hoover Institution colleague John B. Taylor) recommends that interest rates rise one-and-a-half times as much as inflation. So if inflation rises from 2 percent to 5 percent, interest rates should rise by 4.5 percentage points. Add a baseline of 2 percent for the inflation target and 1 percent for the long-run real rate of interest, and the rule recommends a central-bank rate of 7.5 percent."

          https://www.chicagobooth.edu/review/what-makes-it-hard-contr…

      • Daniel Plainview on 09/02/2023 - 09:09
        +1

        @phunkydude
        You are aware they never did any such thing? As in literally saying there will be no rate hikes until 2024. So please stop misleading people, specific words matter and what they actually said was detailed here:
        https://www.ozbargain.com.au/comment/13351150/redir

        • dcep on 09/02/2023 - 11:54

          Haa , but 2 years ago they came out and said no rates hike until 2024.

          Ok Nikko our hero, i apologize it should be rates will remain low at 'current' levels (of 0.1%) until 2024. Not 3.35%.

          Definitely a good move by the head of RBA releasing such public statement by projecting his stellar crystal ball guesses well into 2024.

          https://www.theguardian.com/australia-news/2021/mar/10/austr…

          https://www.smh.com.au/business/the-economy/no-rate-rises-un…

          https://www.afr.com/policy/economy/lowe-admits-embarrassing-…

          https://www.afr.com/policy/economy/rba-confesses-to-2024-int…

          • Daniel Plainview on 09/02/2023 - 12:13

            @dcep: Now now - you (and many others) are the one's misquoting what are very simple and basic words, not me.

            Not sure why you've linked to all manner of editorial articles on the subject like thats going to change or allow us to better interpret what as I said is a very short and simple comment which was made based on the best info they had at hand.

            And then the Ukrainian war started etc and the global markets massively changed and so the RBA felt it had to react - not sure how any of this is odd, surprising or unusual for folks.

            • dcep on 09/02/2023 - 14:59

              @Daniel Plainview: Easy tiger, you can call us misquoting for whatever you want. But that predictions (albeit with caveats) is a forecast guidance given by head of RBA.

              Would Mr. Lowe gives out 2024 predictions AGAIN, if he could turn back time ? The answer is No.
              And you wonder why is that.

              The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.

              RBA will not increase cash rate until such conditions expected only to be met by 2024 at the earliest.

              Why bother giving out predictions then?

              • Daniel Plainview on 09/02/2023 - 15:07
                +1

                @dcep: You (and others to be fair) stated that a certain thing was said, when it was - as pointed out numerous times by several people, quoting what was ACTUALLY said verbatim - that it was actually not.

                Thats misquoting. And thats putting it kindly as someone else might call it lying or being deliberately misleading.

                Rest assured veryone's 'easy' here - as this point with yourself is thankfully not something thats tough to prove or open to debate. Not sure what you last bit is about, your hypotheticals of someone else's thoughts are the definition of pointless.

          • Nebargains on 09/02/2023 - 13:10
            +3

            @dcep: Here is what was actually said:

            https://www.rba.gov.au/media-releases/2021/mr-21-03.html

            The Board will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. For this to occur, wages growth will have to be materially higher than it is currently. This will require significant gains in employment and a return to a tight labour market. The Board does not expect these conditions to be met until 2024 at the earliest.

            Then again in October.: https://www.rba.gov.au/media-releases/2021/mr-21-22.html

            The Board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target. It will not increase the cash rate until actual inflation is sustainably within the 2 to 3 per cent target range. The central scenario for the economy is that this condition will not be met before 2024.

            So they never said no rate rises until 2024 (despite what everyone on social media wants to repeat), they said they won't raise rates until economic conditions require it and they don't think those conditions will be met until 2024.

  • Puglife on 07/02/2023 - 16:34
    +7

    I feel bad for the people who got a home loan at 2% and paid way too much for their house during the recent peak.
    But if you have had a loan for at least 3-5 years I expect that you probably started at around 4% anyway so it hurts…a little…but not as much as people who just got into the market and are seeing repayments more than double.

    • tsunamisurfer on 07/02/2023 - 16:54
      +17

      I feel bad for the people who got a home loan at 2% and paid way too much for their house during the recent peak.

      I do not feel bad at the slightest.

      They were happy to be part of the mechanism pushing up the prices by climbing over other people to purchase the property, this is where they lie in the bed they made.

    • Ghost47 on 07/02/2023 - 18:20
      +2

      People seem to have some sort of crazy idea that just because the bank lets them borrow $1 million at 2% interest rates it’s a good idea, because somehow $1 million isn’t really that much money when you can borrow it so cheaply or something. Makes absolutely no sense to me.

      The RBA was also idiotic by promising low rates until 2024 especially when supply chains were disrupted and they printed a bunch of money. People are (profanity) dumb, this is the world we live in.

      People are very quick to hate on those who bought houses the past couple of years as well. I think it's wrong and actually quite callous to blame people for being ignorant; not everyone understands how finance or macroeconomics work, not everyone is omniscient. I blame people for being stupid, people who think $1 million isn't much money just because the bank says "ok you're approved to borrow up to $1 million" and people who actually believed what the RBA says because they "forecasted" something. Betting $1 million on a forecast is sheer stupidity.

      • tsunamisurfer on 07/02/2023 - 18:46
        +6

        People seem to have some sort of crazy idea that just because the bank lets them borrow $1 million at 2% interest rates it’s a good idea, because somehow $1 million isn’t really that much money when you can borrow it so cheaply or something. Makes absolutely no sense to me.

        Agreed.

        I have been in that position, I did the maths for myself and concluded that I could make the repayments if over the 25 years :

        • Interest rates rises of no more than 3% - 4% to where they were at the time.
        • I seldom took holidays.
        • No one was having children (a year off one income would be a stretch).
        • Cannot afford to be sick for a significant time.
        • Cannot absorb additional expenses comfortably, children, car, maintenance and repairs of house and car etc.

        Ie. No buffer at all.

        The RBA was also idiotic by promising low rates until 2024

        In hindsight it was wrong but they went with the evidence before then at the time which leant towards keeping still.

        People are very quick to hate on those who bought houses the past couple of years.

        For the record I don't hate them.

        I think it's wrong and callous to blame people for being ignorant; not everyone understands how finance or macroeconomics work, not everyone is omniscient.

        I think knowing how finance works should be a pre-requisite trait before signing a mortgage, especially a big one. You cannot just put your hands up and say well I didn't know this was going to happen. It has happened in the past and it will happen again in cycles, you don't have to be omniscient to know that 1.75% was at historic lows and it won't last for 30 years..

        I blame people for being stupid, people who think $1 million isn't much money just because the bank says "ok you're approved to borrow up to $1 million" and people who actually believed what the RBA says because they "forecasted" something. Betting $1 million on a forecast is sheer stupidity.

        I will stay away from the blaming aspect of it. There are so many people that made money hand over fist (be it paper or realised) profits in the VIC and NSW markets in the last 2 years that I understand how they thought it was a good idea. While I don't blame, I expect those people to embrace the territory that comes with making such decisions, be they ranging from less holidays, eating out less, sacrificing food / insurance or losing the home altogether.

        • Ghost47 on 07/02/2023 - 18:58
          +1

          I have been in that position, I did the maths for myself and concluded that I could make the repayments if over the 25 years :

          That's good you were diligent. Many people aren't (as we've seen), and I'm sure even some who were diligent are starting to feel the pinch. It all lies on a spectrum.

          In hindsight it was wrong but they went with the evidence before then at the time which leant towards keeping still.

          That's fair but you'd think after all the money printing and supply chain delays that a rate high could be plausible?

          For the record I don't hate them.

          All good. Tough love I guess?

          I think knowing how finance works should be a pre-requisite trait before signing a mortgage, especially a big one.

          Yeah that's all fair, especially about the fact that low interest rates really only have one way to go. I don't know though, people are already saying the RBA will drop rates at the end of the year. I feel like rates would have stayed low even if COVID-19 never came around because of questions like; how much more productive can people be? What kind of new technologies are out there that can somehow increase productivity? China's population is aging and young people there are giving up (i.e. lying flat) so what are the chances their economy starts to stagnate in the next decade? Since rates have been steadily decreasing since… I duno, 2010 or whatever, I feel like low rates is the main way we've been trying to boost GDP.

          I will stay away from the blaming aspect of it.

          Fair enough, probably a good thing.

          There are so many people that made money hand over fist (be it paper or realised) profits in the VIC and NSW markets in the last 2 years that I understand how they thought it was a good idea. While I don't blame, I expect those people to embrace the territory that comes with making such decisions, be they ranging from less holidays, eating out less, sacrificing food / insurance or losing the home altogether.

          Yeah that's true. I think the main way out for people who are experiencing the pinch who don't want to sell is to move back in with their parents and rent out their home now, or rent out a spare bedroom or something.

        • Odin on 08/02/2023 - 11:00

          In hindsight it was wrong but they went with the evidence before then at the time which leant towards keeping still.

          So you're defending the RBAs terribly wrong statement, but blaming layman everyday families who basically had the same mentality as the expert RBA?

          • tsunamisurfer on 08/02/2023 - 12:10
            +3

            @Odin:

            So you're defending the RBAs terribly wrong statement,

            Its not defending, I know it was wrong but based on what was there at the time it was understandable.

            but blaming layman everyday families who basically had the same mentality as the expert RBA?

            I literally said I stay away from blaming.

            But 'everyday families' knew that interest rates move and they will move only one direction from rock bottom. You cannot now turn around and say no one told me.

            • Daniel Plainview on 08/02/2023 - 12:42
              +3

              @tsunamisurfer:

              But 'everyday families' knew that interest rates move and they will move only one direction from rock bottom. You cannot now turn around and say no one told me.

              You're completely correct - alas for reasons beyond me this is an incredibly unpopular narrative - and so on the contrary & against all logic this is exactly what is pushed (though to be honest I am unsure if this is just the vocal minority or truly what folks in that situation feel).

              I am yet to see a news story where the borrowers say essentially,"Yeah, in hindsight we were a tad greedy and borrowed more than we should have and bought a place that was more expensive than we should have."

              Instead you will hear all the other parties they would have you believe are to blame - the RBA, the Govt (presumably present and previous), the banks, the real estate agents, the mortgage brokers etc. Some of them are partially to blame but like many things in life it's often the person in the mirror who owns the lions share of any blame for our own woes.

              Blaming others is convenient but generally very far from the actual truth - and thus resolving the matter satisfactorily only becomes harder as the underlying issues remain unresolved. In this instance, individual fiscal accountability & responsibility.

              • BartholemewH on 08/02/2023 - 22:32
                +3

                @Daniel Plainview: I saw an article where a couple were complaining about rates. They bought a 4 bedder on the Gold Coast for 500k in 2017 and one of them is an ambulance officer (both employed full time). I have watched the Gold Coast market for at least that long and have family there that happen to be ambulance officers, so I know that they make. Long story short, some people's idea of 'hardship' is seriously warped.

                • Cherry12 on 09/02/2023 - 21:22

                  @BartholemewH: I read that and thought the same. Ambulance officers or paramedics make good money, they shouldn't struggle if they leave within their means. Hardship for people who are on minimum wage.

        • 91rs on 08/02/2023 - 21:57

          I have been in that position, I did the maths for myself and concluded that I could make the repayments if over the 25 years :
          Interest rates rises of no more than 3% - 4% to where they were at the time.
          I seldom took holidays.
          No one was having children (a year off one income would be a stretch).
          Cannot afford to be sick for a significant time.
          Cannot absorb additional expenses comfortably, children, car, maintenance and repairs of house and car etc."

          While it's good to be that aware and I know I was most of the way with your list and others I know were too when buying or had other conditions they self applied.
          For the most part though that does seem like an unreasonable list for what most people's lives involve these days, especially just something as simple and expected as having a family means you can't afford a house or apartment. It shows how broken this country is.

          My aim was based on that between two of us that only one of us would need to work or only one had to work (if there were employment issues) to be able to cover all of our bills, mortgage etc, this did factor in rate increases as we knew it was coming.
          However if they keep going which by all indications they will do, that aim and all the restrictions we put on ourselves about the loan amount was for little.
          Sure we will be able to make the payments, but that rules out one of us not working, significantly less savings, for sure no children, limited ability to take care of aging or sick family/parents which we already know is going to happen.

          We truly have been sold the lie of "the lucky country" and does make the appeal of a mortgage or owning a house so much less appealing.
          To the point of maybe it's better to get out of it, spend as we please, travel, enjoy things and well just ensure we don't live long enough to get old.

        • [Deactivated] on 09/02/2023 - 10:44
          +2

          If you took the same attitude over the past 2 decades your wise decision would have been punished and you would find you can no longer afford anything, as the price of a 1 bedroom apartment becomes the price of a house with a yard.

          The irresponsible ones have been rewarded again and again

      • Daniel Plainview on 08/02/2023 - 15:45
        +1

        The RBA was also idiotic by promising low rates until 2024

        Genuine question - what was the wording the RBA used in this area where it seems all agree they gave an incorrect assessment of their expectations for the cash rate?

        As you've said they 'promised' - which I suspect is grossly misleading of the truth.

        • Debt Free on 08/02/2023 - 16:04
          -3

          it doesn’t matter the exact wording- cos RBA was totally incompetent and desperately trying to make up for their complete incompetence now cos obviously someone educated each of them what they should have been competent enough to do years ago. I want their pay fully returned to Australian taxpayers and I want them sacked.

          • Daniel Plainview on 08/02/2023 - 16:28

            @Debt Free: Hmmm disagree - if people are saying that they 'promised', which as I said I'm sure wasn't the case - how they worded it does matter.

            I mean do you expect them to be infallable? Mistakes happen - the only thing worse is when you do make a mistake refusing to concede it and if they'd refused to act as it would have gone against their previous expectations.

            I think you've been listening to a tad too much talkback radio or happy hour started early where you are - with your 'sacked' 'pay returned' insights. ;-)

            • Debt Free on 08/02/2023 - 23:02

              @Daniel Plainview: I expect the Reserve Bank of Australia to be competent at least and not to make such massive mistakes which affect our whole country. They are the Chosen Experts Top of their field earning mega bucks FOR WHAT exactly?

        • tomfool on 08/02/2023 - 17:30
          +4

          “But our judgment is that we are unlikely to see wages growth consistent with the inflation target before 2024. This is the basis for our assessment that the cash rate is very likely to remain at its current level until at least 2024.”

          https://www.smh.com.au/politics/federal/interest-rates-will-…

        • Ghost47 on 08/02/2023 - 17:46
          -3

          Fair enough, the word “promised” might have been incorrect to use as IIRC they didn’t promise it per se but may have said something like “rates will not rise until 2024”.

          Either way, the point is forecasts by their nature are not certain, listening to any forecast and putting down hundreds of thousands of dollars on it is silly.

          • Daniel Plainview on 08/02/2023 - 19:19

            @Ghost47: Promised 'might have been incorrect'? Thats something of an understatement. It was grossly misleading and not even close to the truth.

            • Takeonme on 08/02/2023 - 22:16
              +1

              @Daniel Plainview: The RBA know every word in their statement is gone over with a fine toothed comb. They wouldn’t say something that could be misconstrued if they didn’t mean it.

              • Daniel Plainview on 09/02/2023 - 09:20
                +1

                @Takeonme: People are going to interpret things the way they want to see them - there's a scientific term for it. A lot of folks were chomping at the bit to take out massive loans at what were literally alltime historically low rates. They needed no encouragement at all and the RBA can only go off what it knew at the time and the war in Ukraine caused a global shakeup.

                So folks took away from what they said, what they wanted. Just like in this very thread you can see people claiming the RBA literally 'promised' and then others saying 'well that said there would definitely be no rate rises' etc.

                None of which was the actual case but it's recounted and read by others and now seen as a gospel truth despite the facts being right there and then when this is pointed people say,"Oh well they knew it'd be read this way."

                At the end of the day - folks just seem to WANT it to be a certain way, fine. That doesn't change how much folks borrowed, on what terms etc. But then again others will tell you this isn't there fault either. :-/

            • Ghost47 on 09/02/2023 - 01:28

              @Daniel Plainview: Even though the RBA didn’t explicitly promise rates would remain low, it’s not a far stretch to think that some people out there would’ve interpreted it as a promise.

              • Daniel Plainview on 09/02/2023 - 09:14
                +1

                @Ghost47: Some people 'interpret' the shape of the morning clouds as divine info about the sharemarket today. The RBA is as with most central banks very careful about the wording of official statements.

                So reading between the lines and then acting in your own financial interests from this - is ultimately on you, not them.

                The lack of personal accountability and desire to pass it off onto others here is absolutely staggering

                • Ghost47 on 09/02/2023 - 09:31
                  +1

                  @Daniel Plainview: That cloud comment is nonsense, or do you have proof that someone actually does that? Despite being careful with wording the RBA still relies on models. Do you expect modelling to be correct?

                  As I said, blaming people for being ignorant about how macroeconomics work is callous, if you don’t know something you don’t know something. Betting hundreds of thousands on a forecast is another matter.

                  • Daniel Plainview on 09/02/2023 - 09:48

                    @Ghost47: My point is once anyone thinks they can 'read between the lines' thats on them. As said in other comments, people were falling over themselves to take out 'max' loans at record low rates. They needed little to no encouragement & the RBA isn't their parents or financial advisor.

                    Models are a tool that provide insight and assistance - in lieu of a crystal ball they're the best we have. I expect modelling to help, it's never going to be 100% correct but yes I'd be certain it's often 'correct'.

                    Again - you can say 'blame', which I think is the wrong term - as they didn't 'do' some criminal act etc - but they're accountable for their own finances - and if their loan had worked out incredibly well and they'd made terrific returns on the property they'd want it no other way.

                    I'm confused by your reference to people being ignorant to how macroeconomics work? In which way do you perceive that these people's 'ignorance' (your words not mine) hurt them?

                    • Ghost47 on 09/02/2023 - 21:35

                      @Daniel Plainview:

                      My point is once anyone thinks they can 'read between the lines' thats on them.

                      Do you think these people who "read between the lines" had any understanding of macroeconomics and that the RBA and economists are not always correct? There are people out there who believe(d) everything the RBA said because they perceive them to be the experts. Just like how you would listen to a doctor or a financial advisor, they listened to the RBA and it's simply callous for saying it's all on them. There is a reason why people turn to experts and SMEs, because they believe they know more than them.

                      it's never going to be 100% correct but yes I'd be certain it's often 'correct'.

                      If you live in a world where models are "often correct" maybe you should work at the RBA because anyone who has been exposed to or studied econometrics, statistics, predictive analytics etc. will understand that there are so many variables/features/attributes that go into a model that modelling interest rates with 100% (or even close to) accuracy is notoriously difficult and models in general — except for the most simplest (e.g. ones that predict chance of death using the Titanic dataset) — are actually often wrong.

                      you can say 'blame', which I think is the wrong term - as they didn't 'do' some criminal act etc - but they're accountable for their own finances

                      First of all, blame is not only attributable to criminal offences. Secondly, I blamed people for doing extremely dumb stuff, like borrowing at their maximum limit or at 6-7x their income because "the bank let them", I don't blame them for being ignorant nor hate on them for buying at the worst possible time, which is what you are doing when you say they "read between the lines", i.e. listened to those who they perceive to be "experts" on the matter.

                      I'm confused by your reference to people being ignorant to how macroeconomics work? In which way do you perceive that these people's 'ignorance' (your words not mine) hurt them?

                      Did you read my original comment completely or did you stop after you saw the word "promising"?

                      Ignorant: lacking knowledge or awareness in general; uneducated or unsophisticated. e.g. not understanding how a vaccine works because you didn't study vaccinology
                      Stupid: having or showing a great lack of intelligence or common sense. e.g. believing you automatically know how all vaccines work because you read a comment in a far-right facebook group

                      I have italicised the most pertinent parts of both definitions.

                      The first thing you need to realise is that not everyone has the exact same level of understanding of a certain topic or subject as everyone else. Therefore, it stands to reason that not everyone would have a basic or even intermediary understanding of macroeconomics, especially when the rate of enrolments into economics course in Australia has been falling. This is what I mean say "ignorance".

                      These people [those who do not understand macroeconomic principles] will likely not understand that if a government stimulates the economy by giving out money that it essentially increases the supply of money and therefore it is likely inflation will follow, especially when supply chains are also disrupted. They also will likely not understand that interest rate forecasting is often incorrect and economists/central banks often get it wrong, because modelling requires capturing many variables and determining how those variables will affect the final result. This is not a shot at you by the way, it is a simple fact of modelling anything remotely complex.

                      These people (who are ignorant to macroeconomic principles and think the RBA knows everything because they do some sort of magic behind-the-scenes modelling) listened to and believed the RBA when they kept making statements about not foreseeing rates increasing until 2024 — because after all, they are the "experts" — and borrowed silly amounts of money that the banks approved (which is the stupid part). Note: there is a difference between borrowing money based on what is happening in the world, and borrowing stupid amounts of money based on what is happening in the world.

                      Therefore, people cannot really blame (or IMO even attack or hate on) ignorant people who don't understand macroeconomics who bought in 2021 when rates were at record lows and the RBA (i.e. the "experts") made multiple statements about rates likely not increasing until 2024, after a period where the government unprecedentedly stimulated the economy with billions of dollars and supply chains were disrupted, because they [homebuyers] didn't understand how things work — that is why I said it is callous to blame people for being ignorant. Just like how one shouldn't attack a general practitioner for not being able to build a fusion reactor, one shouldn't attack a 30 year old for not understanding how macroeconomics works if they never studied macroeconomics.

          • gromit on 08/02/2023 - 22:28
            +1

            @Ghost47: They did not even say rates wont rise. Though much of the media incorrectly interpreted it as promised. Tgey said very likely not to rise based on these factors. Most thought them wrong at the time, but it was nothing close to a promise or statement that they wont rise, that was just garbage reporting in media.

          • pogichinoy on 09/02/2023 - 13:00
            +2

            @Ghost47: Promised?

            Fake news. Get your facts straight.

  • mitt on 07/02/2023 - 16:51
    +3

    High interest rates have me annoyed but not worried. I always leave myself some wiggle room but its getting to the point where it would have been cheaper to keep my savings in investments & continue to rent.

    • us3rnam3tak3n on 08/02/2023 - 20:48
      +1

      Have you looked at the rental market lately?

      • mitt on 08/02/2023 - 22:03
        +1

        I was in a sharehouse. $200PW, could still be at that rate.

        If you dont have kids & are willing to sharehouse you can live in some damn nice places really cheap. The trick is to pick a big place with lots of bedrooms then fill it up.

        • helpme on 11/02/2023 - 08:41

          Yeah I was paying $120 a week, 3 bedroom house with 3 others.

          • mitt on 11/02/2023 - 09:02

            @helpme: Nice, that's a good rate. My personal best was $95 PW all bills included, that was in a 5 bdr house with 7 people total. We converted a downstairs rumpus room into an oversized 6th bedroom that a couple shared. The $200 PW was 3 people sharing a nice 4bdr.

            • pr0o on 22/02/2023 - 14:28

              @mitt: you can't beat me. I paid $65 pw sharing a room with chinese when i was student :P

              • mitt on 23/02/2023 - 13:54
                +1

                @pr0o: Ha thats impressive. We could have gone harder but we decided a bit more for an upmarket place in a good area was worth it.

  • dm02 on 07/02/2023 - 17:24
    +13

    Woohoo, better return on my savings account! 🥳

    • Trying2SaveABuck on 07/02/2023 - 18:05
      +11

      savings return 4.5 percent

      inflation 8 percent

      you are still 3.5 percent worse off….

      • dm02 on 07/02/2023 - 18:09
        +3

        I suppose it's better if I leave it in a transaction account and end up 8% worse off

      • Takeonme on 08/02/2023 - 22:17
        +1

        4.5% minus tax

      • [Deactivated] on 09/02/2023 - 08:33

        Take away income tax, now 5% worse off

    • Odin on 08/02/2023 - 11:02
      -4

      No one should have any significant amount in a cash savings account. It should be wisely invested.

      The rate rises benefit nobody

      • dm02 on 08/02/2023 - 12:34
        +1

        I'm not ballsy enough for that

      • Debt Free on 08/02/2023 - 16:09

        invested in what?

        • Drakesy on 08/02/2023 - 16:31
          +5

          High Yield Investments!
          AKA
          A Mercedes AMG!

        • Daniel Plainview on 08/02/2023 - 16:31
          +1

          THIS is a fair point - it's easy to say 'should be invested' but the last few years haven't been condusive to finding many places that are safe. ESPECIALLY if the investors timeframe is short, as seems alluded by the inference that it shouldn't be in your account, I'd say you'd better off taking the slight effective purchasing haircut in a high interest account - than playing the markets.

          Now that all said, wherever possible you should ALWAYS be playing the markets - but jumping in an out, is essentially gambling and should be viewed as such unless you're a very rare and skilled bird. Which I certainly am not.

        • Odin on 09/02/2023 - 09:40

          Vanguard growth fund. Simple.

Login or Join to leave a comment
Login Join