Why we have got to grin and bear it – but most of us can

We know that inflation and interest rates are increasing at unbelievable rates.  But did you know that they are also due to drop at a rapid pace too?

This week the Reserve Bank (RBA) forecast that inflation would peak at around eight per cent later this year.

But it then said that inflation is expected to decline to around 4.75 per cent over 2023 and a little above three per cent over 2024.

All of us are now feeling the pain in our hip-pocket, but the evidence is that this won’t last and that we can manage the pain.

Over the past weeks, I have been checking in with a lot of my clients to see how they are faring in this interest rate environment and been pleasantly surprised as to how many of them had the wisdom to fix their loans when rates were ultra-low!

Recent research shows that those who fixed their loan may have saved as much as $20, 000 compared to if they had opted for variable loans.

Someone who fixed for two years in July last year would save $20,353 in interest payments compared to someone on a variable rate.

These clever borrowers may never feel the impact of these rate rises as their loans will only become variable when inflation drops in 2023 onwards.

But, even if borrowers are now facing rate rises, many have built a cash buffer that will tide them over.

Earlier this year, data was produced that Australian households were on ­average almost four years ahead on their mortgage payments, with a record $50bn funnelled into offset accounts over the past two years as homeowners used the pandemic to pay down their loans.

Most of us are economising to get through the next few months (I know I am buying a lot more home brand products from Coles) and with employment remaining strong, most of us will be able to weather the storm.

In 12 months’ time, chances are we will be looking at:

• lower property prices
• more affordable home loans

But, if you are struggling right now, feel free to get in touch.  We have been able to negotiate better rates for our clients with their banks and in some cases we have saved them a mozza by moving their loan to a whole new bank.

Graeme Salt is a leader of The Futurus Group, whose brands primarily comprise Origin Finance, Walker & Miller Training as well as Chan & Naylor Finance. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055