The Cash Rate is increasing but what does that mean for you? After 10 years of low interest rates, in May 2022 the RBA started a cycle of cash rate hikes attempting to curb inflation. This came as a shock to many Australian households, especially given the rhetoric from RBA Governor Phillip Lowe repeating that such changes were not to be expected until circa 2024. Increases to the RBA cash rate have had a significant impact on how lenders in Australia set their own home loan interest rates for both new and existing borrowers which has played a significant role in the property market activity for the second half of calendar year 2022. The RBA hiked 0.25% in December, taking the cash rate to 3.1%. The general consensus of Australian senior bank economists is that we will likely still yet see a further 0.50% - 1.00% in cash rate increases over the coming months before inflation is addressed, rates stabilize and then start to taper back sometime mid to late calendar year 2023. The only thing you can do to “preserve” your borrowing capacity is to secure your preapproval sooner than later, as most lenders will use the assessment rate on the day of lodgement of the pre-approval. This means once you’re pre-approved for ‘x’ amount, the majority of lenders will honour this for the entire 3 months irrespective of what happens to interest rates. So, even if you weren’t considering purchasing a property in the immediate term, lodging your pre-approval proactively now will lock in and maximise your borrowing capacity for the next 3 months. Finance Update. Harry Favetti | 0416 478 120 Azura Financial
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