Brokers are being warned of a ‘perfect storm’ that will force the Reserve Bank of Australia’s hand into upping the cash rate at some point this year.
John Kolenda (pictured), CEO of aggregator Finsure and one of the most respected voices in the broker channel, suggested the combination of inflation and labour shortages would ensure a cash rate rise ahead of schedule, potentially by the middle of the year.
“The overall outlook is like a perfect storm which will force the RBA to put rates up by mid-year,” he said.
“The increased competition for skilled workers is also contributing to greater inflationary pressures. These issues will be around until such time as we see a dramatic increase in migration and supplies getting back to normal to support industries effected by those issues.”
“We are likely to see an increase in the order of 0.25% to 0.50% over a short period before the RBA assesses the impacts in raising rates further,” he said.
“It’s been more than 11 years since the RBA lifted rates and many mortgage holders are unaccustomed to rate increases.
“History has shown us that as soon as the RBA starts to increase rates we see an immediate impact on consumers as they become more cautious, which leads to a slow down across the economy.
“It is likely that the RBA will increase rates a few times from record lows before we see that impacting the general consumer spending habits.
“It will be a wise move to be prepared by either paying down loans or accumulating savings. Speak with an experienced mortgage broker who can help you get rate rise ready and provide a tailored strategy for your particular circumstances.
“Make sure you’re getting the best rate possible now and know what your repayments would change to if rates increased by 0.25%, 0.50% and even 1.0%.”