July 2023 Interest Rates On Hold

July 2023 Interest Rates On Hold

Experts predict that there will be two more rate hikes this year, but they expect them to be reversed quickly.

After 12 interest rate increases and 2 interest rates holds over the past 14 months, The Reserve Bank decided in July 2023 to keep interest rates steady at 4.1 percent.

They think they might have raised them enough for now. Governor Philip Lowe said that although inflation is still high and will stay that way for a while, it has reached its highest point.

The Reserve Bank wants to wait at least a month before raising rates again.  They want to see how their actions affect inflation and the overall health of the economy, especially since the economic future seems uncertain.

  • The "mortgage cliff" is approaching. Normally, Australians don't take out many fixed-rate mortgages. But in 2020 and 2021, we took out a lot of them with fixed rates for two or three years while the rates were low.

Around 880,000 of those fixed-rate terms are about to end, which means those borrowers will have to switch to rates that are around 5.5 percent. This will increase their monthly mortgage costs from about $2,100 to around $3,000.

The Reserve Bank predicts that about 15 percent of borrowers will face negative cash flows in the coming months. This means their income won't cover their expenses, and they will have to use up their savings, work more hours, or tighten their belts.

  • People are already spending less. Retail spending has increased by 4.2 percent in the past year, but prices have gone up by around 7 percent while the population has only grown by 2 percent. This means that each person is buying less!
  • There's an increasing chance of a recession. Anything that causes us to cut back on spending, even more, could lead to a recession. It has already happened in New Zealand and might happen in the United Kingdom soon.

According to experts, there's a 38 percent chance of a recession in Australia. That's higher than at the beginning of the year but still less than 50 percent, which means we might be able to avoid it.

At Cumberland Realty, we can give you expert advice that's easy to understand.

Reach out to the team at any time!

Francesca Luccitti: 0430 393 396
John Manaras: 0430 299 280
Franco Di Iorio: 0424 718 745
Helen Leyten: 0434 211 378