Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.

Home owners told to prepare for interest rate rise

Home owners



Low interest rates have meant the cost of living pressures are less for people with a mortgage

Reserve Bank Governor Philip Lowe has advised Australian home owners to build up buffers so they are ready for when interest rates inevitably increase.

Lowe remains vague on the timing of a rise in the cash rate, which remains at a record low 0.1 per cent, but says a move later this year is ‘plausible.’

Interest rates will go up, he told the National Press Club on Wednesday in answer to a question from the floor.

We need to be prepared for that. And people need to have buffers, he said.

However, he said the positive news is that most households are paying off more than is required by the current level of interest rates, or they are keeping money in their offset accounts and redraw facilities.

So there’s a lot of capacity for many borrowers to keep their current level of spending even with higher interest rates because they’ve built up the buffers, he said.

Asked if people should be scrambling to get a fixed rate mortgage or sticking with a variable rate loan, Dr Lowe said it wasn’t something he has thought about as he no longer has a mortgage.

I’ve lived in my house for more than 25 years and over those 25 years. I’m in the fortunate position of having paid it off, he said.

Low interest rates have meant the cost of living pressures are less for people with a mortgage.

The consumer price index showed annual inflation running at 3.5 per cent, led by a 30 per cent increase in petrol prices in the past year.

However, the Australian Bureau of Statistics’ selected living cost indexes released on Wednesday shows that price pressures vary between household groups.

Important:

This article is for information purposes only.

Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.

There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.



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