Are rates going up again… or are we finally done?

Are rates going up again?

Or are we finally done?

It's probably the most common money question I've heard this week.

And honestly, I understand why.

For the last few years we've all been on an interest rate rollercoaster.

Rates up.

Rates hold.

Rates might go up.

Rates might come down.

One economist says one thing.

Another says the opposite.

Eventually people stop listening because nobody seems to know.

This week the Reserve Bank of Australia decided to hold rates steady.

The US Federal Reserve did the same.

At first glance, that sounds like good news.

But the real story sits underneath the headlines.

Inflation has been stubbornly hanging around longer than expected.

At the same time, some of the pressures that worried markets earlier this year are starting to ease.

The peace agreement in the Middle East and the reopening of the Strait of Hormuz should help oil prices continue to settle down.

And when oil prices fall, that eventually flows through to fuel, freight and transport costs.

That's important in a country as large as Australia.

Then there's unemployment.

One number the RBA watches very closely is the unemployment rate.

It's now sitting around 4.5%, the highest level we've seen in four years.

It feels strange to say, but higher unemployment often helps reduce inflation pressures.

Which means it can help create the conditions for lower rates in the future.

It doesn't feel fair.

But that's how the economic machine works.

This week I was talking with a client who asked:

"James, should we fix our mortgage before rates go up again?"

It's a great question.

The challenge is that even the banks can't agree.

Westpac is currently forecasting more rate hikes.

CBA believes the hiking cycle is over and expects cuts in 2027.

ANZ and Macquarie recently reduced some of their fixed rates.

NAB and Westpac moved some fixed rates higher.

And to make things even more confusing...

Some lenders are now reducing variable rates.

So who's right?

The answer is nobody knows for certain.

Trying to perfectly predict interest rates is a bit like trying to predict the weather three months from now.

You might get lucky.

But you probably won't.

That's why we focus on something different with clients.

Instead of trying to predict rates, we stress test their plan.

What happens if rates rise another 1%?

What happens if they stay where they are?

What happens if they eventually fall?

When you understand the impact beforehand, the headlines become less scary.

One of my favourite reminders is:

"Confidence doesn't come from knowing what will happen. It comes from knowing you'll be okay if it does."

That's the goal.

Not predicting the future.

Preparing for it.

For those wondering about fixed rates, my general observation is this:

By the time everyone is talking about fixing rates, the opportunity has usually passed.

Banks are very good at protecting themselves.

Fixed rates are designed to make money for the bank first.

But they can still be useful for people who value certainty and consistency.

One final thing worth mentioning.

Competition between lenders is heating up again.

We're now seeing some owner-occupier variable rates starting with a 5.

In some cases, rates are down to around 5.99%.

The sweet spot for achieving the sharpest rates is often having a Loan-to-Value Ratio (LVR) below 70%.

That means if you've built equity over the last few years, it could be worth reviewing your loan.

The biggest mistake we see?

People assume their bank will automatically look after them.

Unfortunately, loyalty rarely gets rewarded in banking.

Questions get rewarded.

If you're a client and want us to review your current rate, your mortgage structure or your strategy for paying debt down faster, simply hit reply.

And if you're not a client but you're wondering whether you're paying too much interest, reach out.

Sometimes a 15-minute conversation can save thousands of dollars over the life of a loan.

Talk soon,

Reading is helpful. Having a plan is better.
Book your free 30-minute Discovery Session and let’s build a strategy that fits your life.

7Wealth Pty Ltd ABN 44609210246 is a Corporate Authorised Representatives and is authorised throughCobalt AdvisersPty Ltd ABN 64 628 654 099 who is an Australian Financial Services Licensee 512550. 7Wealth Pty Ltd is a Credit Representative ofAustralian Finance GroupLtd ABN 11 066 385 822 (AFG) Australian Credit Licence 389087.
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