RBA paused interest rate raises this month. A little bit of relief for some mortgage holders.
Of course, it's hard to predict interest rates beyond more than 6-12 months. Although looking at fixed rates, it looks like you can get a slightly lower rate if you're willing to fix for 2 year. But just asking the OzB oracle, what is your prediction for the next 6 months? Will they be higher? Lower? Stay the same?
Im not sure how holding them is relief… the pain is still there
Relief will come in May next year when they go down.
But it aint double figures - yet
its not going to double figures
What makes you think they will drop in may? It's anyone's guess where any of this is going.
Lots of people are still spending big.
lots of people are stupid as well
Not if they're paying cash. Holding onto it is a sure fire way to lose. Best to spend it before inflation devalues it further.
I want to see the stats on the spending. Who is paying by credit, who is paying by afterpay/zip/pay in 4 paypal.
I also want to see if credit card statements are being paid on time, same or late from previous data set.
I'm really interested in this too, I want to see how the hell people can afford to spend the money they're spending during this time period.
Lots of people are cashed up, don't have mortgages as they own their own house and are investing in assets as inflation eats into their cash saving
As someone who works retail, it boggles my mind how people can afford to spend so much, they're buying the same amount of stuff (maybe a bit more), but just paying extra for it, with how bad interest rates and inflation are, I would have thought people would spend less because their money won't go as far. Absolutely mind boggling to me.
Oldies with 5+ investment properties, no mortgages and bucket loads of cash
Hate to poke a hole in this myth but look at an average day on OzB to see the consumer discretionary goods (i.e non-essentials) folks are clicking through to and supporting by purchasing.
The vast majority of it is not stuff that 'cashed up Gramps & Granny' are buying….the takeaway is that it's much younger folks that are still spending far more on discretionary consumer items than you'd think they could 'afford'.
There's beena growing divide in the 'haves and have nots' (inequality of wealth) in Australia for decades and the pandemic period made this even worse. Generalising by age, though somewhat skewed towards 'older'='wealthier' is a tad simplistic.
Get where you're coming from but I wouldn't be using an average day on Ozbargain as my metric for identifying who's spending the most money
I can drive down the street at any given day/evening and, where I live anyway, a vast majority of people shopping/eating out are retirees
@lachhelix: I concur, but to be fair both our 'metrics' i.e your seeing who's shoping eating out - are equally flawed.
My point remains that the 'popular' narrative is that young people are doing it tough and oldies are rolling on beds of cash.
The reality is somewhat more in the middle - but there definitely are folks doing it very tough and also folks who are doing well. Hanging on the age aspect alone only makes for angry threads that get no progress for anyone - as income inequality is a massive issue that is little spoken about.
@Daniel Plainview: Yeah - I agree with that.
My comment was obviously a generalisation and it may possibly be based on perception - getting put into groups based on age isn't the right way to go about it - I know a lot of young (and older people) are doing it tough
I guess from what I see (at least 5/10 a day) - it's always the younger people who are homeless/post about losing their rentals/sleeping in their car
Likely where we're both looking though!
Most folk don't realise that until interest rates matches the rate of inflation, we're experiencing negative real interest rates. It might sound hard to swallow but the current interest rates are actually extremely cheap.
In practice, this means interest rates must keep rising or CPI decline. It is a lot easier for governments to raise rates than to control, much less lower, CPI. Accordingly, I'm betting on at least 2 more rate rises this year, possibly even 3.
Indeed, what most people don't realise is current inflation is driver by a shortage of supply (take eggs and milk for example), not an increase in demand due to excess money …
Current monetary policy is based around moderating demand (ie. increase interest rates, take money out of peoples pocket so they can't buy more stuff, hence decreasing inflation), but when inflation is driven by a shortage of supply, this principle does not apply :/
It means the RBA will keep hiking rates due to inflation and inflation will keep going up due to supply shortages, rinse, repeat … we will be in a deep recession before the RBA realizes their mistakes :/
I am betting 10% interest rate by the end of 2025, will be good for my investments, fixed term rates might be viable again vs property :D
your not still believing the shortage of supply nonsense the business market keeps spruiking?
its finally been published in the open that corporate greed is part and parcel fueling inflation (we all already knew this anyway)
People with an IQ over 90 knew from the start this whole shortage of supply thing was total BS to hide greed and profits.
There was a short period at start of covid wherer there was genuine shortage, but business saw just how stupid the average consumer was and so prices slowly crept up, until mid 2022 when business really saw just how even STUPIDER than stupid consumers were and ramped up the inflation.
And we still have people on this website defending their right to pay higher and higher amounts for the same crap (must be business owners thinking they are sneaky).
Higher rates can help increase supply. Look at the number of people taking on a second job or side hustle to help pay increased mortgage costs. Not enough workers was part of the problem.
Then you have people renting out spare bedrooms for extra cash to pay the mortgage. This should in theory help stem rental increases.
the high volume of jobs surely translates into the exodus of people we had from australia during covid and then them ultimately not returning so we have a labor pool deficit
@MrThing: And the rich people (and the govt) didn't like this so we get Labor with new immigration policy
I reckon it's peaking but not peaked. There's still room for a couple of 0.25 rises before things really start to get messy. Until we start to see property investors/speculators start exiting in droves theres still room to keep going up
why would property investors start leaving when its so cheap to hold property and the government covers up to half your bill, its first home buyers that will be leaving.
Because high interest rates make it not cheap? Rents can only be raised so much to cover increased expenses.
Sydney median rents hits $620 per week.
People seems to not mind paying however much to put a roof over their head.
@dcep: But there is a ceiling to what rents can be increased to which is tied to interest rates until it’s not and people have to sell their investment properties.
@dcep: But as rents rise, increasing numbers get a flat mate, increasing numbers put off moving out of Mum & Dad’s and increasing numbers move back to a spare room.
When the rent exceeds willingness to pay, there is a tipping point where any increase results in a vacancy.
And you might say, not my place, which is a 4Br for families or something, but it flows down the line and your potential tenants are the ones not moving on from a 2br when they have another kid because it costs too much.
Even at the absolute top of the market rents have a ceiling, as a expat moving to Sydney for a 2yr contract will say “I might as well buy a slightly smaller place and keep it as an investment when I leave with these high rents.”
b b b but what about the corporate profits causing inflation
2 more!
And the fan will slow down…
It depends. If you think it is going to go up another 0.5%. Your current variable is 6.5% then you are looking at 7% at the peak.
If fixed rate is 6% for 2 years then it depends on how you view the 24 month cycle.
Westpac you can split your loan and pay up to $30k into the fixed component. If you think you are going to a lot of money you could have say 5x $100k fixed loans and pay $30k against each which will bring your balance down.
CBA allows you to pay $10k per year into your fixed loan without penalty so you could in theory split it into $20k blocks and be able to pay it all off in 2 years if you think you are going to get disadvantaged.
UK, New Zealand, US all have much higher rates. We can’t be the odd one out - AUD could tank and we’ll have real inflation issues
Yes but due to fixed mortgages it doesnt have the same effect
UK (and NZ?) have similar mortgage deals with fixed where mostly on 2/3/5yrs, unlike 30yrs in US.
But then, UK inflation was over 10% back then.
General consensus is for 2 more.
You can track the future implied yield curve here:
https://www2.asx.com.au/markets/trade-our-derivatives-market…
If you exclude the last few years because of covid, interest rates would still be near an all time low. It is inflation that is hurting people more than interest rate rises
FYI - good balanced discussion on the matter with a guy who's highly regarded in the field:
https://youtu.be/8cBPIoTxti8
If you all with mortgages expect the major 4 banks to be the first to lower rates from there peak of 7.5% (forecasting I know it sounds shite, I hope not) your kidding yourself.
In days gone by the banks would only follow the reserve bank go up with the reserve and down with the reserve.
Now they are a bunch of rogues and will stiff whoever they want mortgage holders, savers, staff and anyone else they can screw over for a dollar.
Except of course for the CEO's and the bloody shareholders.
Just look at there saving rates you have to be rhodes scholar to get 5% with there fangled plans….. ACCC how about it….
Australia has the lowest interest rates compared to rest of western world. Property prices must go brrrrrr
I would say at least two more rate hikes.
Central banks always overshoot.
higher please
they've been artificially manipulated to stay at lows for too long
my guess they'll stop around 8%
"higher please"
YEP, higher please.
Us savers have been screwed for far to long in favour of those silly enough to buy wildly over-priced property resulting from artificially depressed interest rates.
I feel a reckoning is coming.
Are the banks even passing on the savings rates though? Alot of them still seem to sit around 1 or 2% from what I can see, hardly anyone offering close to 3% if you exclude introductory rates.
based on inflation, it better not have
.