Inevitable rate rise will surprise mortgage holders

Inevitable Rate Rise Will Surprise Mortgage Holders

Mark Stevenson, Managing Director at Bell Partners Finance (now Evolve Lending & Finance) wrote for The Western Weekender in February 2022, warning that the coming rate rise cycle would catch many mortgage holders off guard despite the growing noise in media and financial markets about the timing of the first move.

With inflation climbing and the RBA under increasing pressure to act, economists were bringing their rate rise forecasts forward well ahead of the central bank’s own guidance. The RBA had consistently pointed to 2024 as the earliest likely date for a hike, but some were tipping action as early as May 2022, which would place the first move in the middle of a federal election campaign. The last time that had happened was 2007, when rates rose during the campaign that saw Kevin Rudd defeat John Howard.

Official inflation figures showed headline CPI at 3.5 per cent for the year to December and underlying inflation at 2.6 per cent, within the RBA’s target band but rising. Some major bank economists were forecasting an initial lift from 0.1 to 0.25 per cent followed by further increases through the year, while others cautioned that ongoing COVID disruption through January and February would cloud the labour market picture enough to give the RBA reason to wait.

Mark’s key observation was not about the timing but about the preparedness of borrowers. Despite months of commentary, many mortgage holders were not genuinely engaging with the prospect of higher repayments. The last RBA rate hike had been in November 2010, meaning a significant share of current borrowers had never experienced a rising rate environment. When the move finally came, Mark anticipated a sharp increase in people seeking broker advice.

For anyone who had not yet reviewed their loan position in light of the changing rate outlook, the time to act was before that first hike arrived. Contact Evolve Lending & Finance to assess your position and put a plan in place.