Are your interest rates going to rise soon?

17 February 2022, 6:51 am

Are your interest rates going to rise soon?

It seems to be the question on everyone’s lips right now. Will a rise in interest rates hurt and how can I be sure to make the right decision?

If you are a retiree, you are probably hoping yes, because you might finally get some decent interest on your superannuation.

If you are a younger homeowner or investor just starting out, you are probably crossing your fingers for a no. With the recent big rises in property values in both cities and certain regional areas, affordability is tough enough as it is without higher interest rates.

We hear you and we do understand – no matter which side of the fence you come down on.

Unfortunately, there are a lot of people with a conflict of interest pushing fear and confusion in the media as usual. So let’s cut through the BS and discuss the answer to this question. The answer is most probably yes, but we don’t know when.

Interest rates are a ‘tool’ of the Reserve Bank. They are used as a ‘lever’ against inflation. The theory is that if you raise interest rates, then inflation will be kept in check.

There is another tool that the Reserve Bank has been using lately to help our economy survive the pandemic – it is called quantitative easing. By another name, this is increasing the supply of money in the economy – or bluntly – printing more of it so government investment can be funded.

Inflation generally goes up when there is more money around.

Since there is more money around and inflation is going up, it is likely the Reserve Bank will start using interest rate increases to take the heat out of the economy.

When they do this really depends on their overall goal, which is to make sure there is good employment and individuals and businesses have as much support to recover from the pandemic as possible.

It is a real balancing act, and since none of us have a crystal ball, nor a seat on the Reserve Bank board, it is unlikely we’ll get any warning on rate increases until they happen.

That won’t stop a range of commentators like the banks, real estate agents and others either trying to pre-empt it, scaring people to act.

Are your interest rates going to rise soon?

What is our considered advice?

This depends on your personal situation, but in short, you should be doing whatever you can to take advantage of the low interest rates while they stay low. This might be paying more off your loan, or getting into the market sooner rather than later.

Our professional team can take up the more specific conversations with you directly as they will depend on your situation and your goals.

Speak to our team for more information. Call (03) 9017 3235 or email to set up a no-obligation discussion.

The information in this article is general in nature and does not take your specific needs or circumstances into consideration, so you should look at your own financial position, objectives and requirements and seek financial advice before making any financial decisions.