Inflation rises again...what it means for interest rates
The Australian Bureau of Statistics (ABS) has today released its inflation figures for the month of November. It shows that CPI rose 7.3% over the year to November. This is up from 6.9% in October.
Contributing factors to the spike in inflation are housing, groceries, dining out and travel. Housing costs include rent and the cost of building a new home; this has increased 9.6% over the last year. Australians have also been splurging in retail spurred on by Black Friday sales in November. Australians are also feeling the pinch at the bowser with rising fuel costs also being a contributing factor to the inflation spike. Fuel costs have directly impacted flight and accommodation costs for travellers, which recorded an annual rise of 12.8% the highest it has been in five years.
What does this mean for continued interest rate rises and the impact upon home loan rates and repayments? The RBA has been using increases in the cash rate to try to curb inflationary pressure. The news of the hike in inflation for November has increased the likelihood that the RBA will continue with its cash rate rises, when it meets next at the start of February.
With no apparent slow down in inflation in the cards, home loan customers need to prepare themselves for continued increases in their variable home loan rates in 2023. This means rising repayments on their loans.
Those who particularly need to take heed are customers who are coming out of fixed rates in the next 12 to 18 months. For many customers who locked in 2% (or even sub 2% interest rates) over the last 2 years, the impact is going to be greatly felt when they revert to variable rates sitting at 5% and above.
It is a daunting time for many home loan customers. It is important that people are aware of what is likely to come in managing their budgets and working out what it going to be affordable when coupled with ongoing increases in home loan repayments. My advice is to plan ahead as much as you can. Speak to your broker for advice.
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