Don’t count on rates to fall next year

Don’t Count on Rates to Fall Next Year

Mark Stevenson, Managing Director at Bell Partners Finance (now Evolve Lending & Finance) wrote for The Western Weekender in December 2023, urging borrowers not to assume relief was on the way and to remain prepared for further volatility in the rate environment heading into 2024.

The RBA had paused at its December meeting, giving mortgage holders a temporary reprieve. But the broader picture was more complex. New RBA Governor Michele Bullock and Treasurer Jim Chalmers had agreed to a series of operational changes to how the bank would function in the year ahead, including fewer board meetings and greater transparency in decision-making. Notably, the RBA had also refined its inflation target from a range of 2 to 3 per cent to a more specific midpoint of 2.5 per cent, a level not seen since March 2013.

After inflation peaked at around 8 per cent at the end of 2022 and the RBA delivered 13 consecutive rate rises to bring it under control, the October 2023 monthly measure had inflation at 4.9 per cent, with the RBA projecting a return to just under 3 per cent by year end 2024. The question was how that trajectory would affect the rate path.

Economists were divided. Some interpreted the new 2.5 per cent target as a signal the RBA might hold rates higher for longer to hit the more precise mark, while others argued the absence of a strict deadline gave the bank flexibility and would not materially change the rate outlook. Mark’s read was straightforward: do not assume rates will fall in 2024, and remain prepared for the possibility of further rises.

For borrowers, that meant continuing to review their loan structure, build financial buffers where possible, and not delay conversations about refinancing or rate renegotiation on the assumption that relief would arrive and solve the problem.

Do not wait for rates to move before taking action on your loan. Contact Evolve Lending & Finance to review your position now.