A brake on one wheel: Evolve quoted in The Adviser on the September rate rise

The Adviser has covered the big four’s call on this week’s Reserve Bank meeting, and asked for our view on what it means for borrowers.

The banks are united. All four expect a 25 basis point rise on Tuesday, even with unemployment ticking up to 4.6 per cent in August, and markets have more rises pencilled in for November and December.

My point to The Adviser was that this decision was partly written in May, in the budget, not by the Reserve Bank. The government has far more tools than the central bank to manage demand, and it pulled them in the wrong direction by raising taxes on property investors and lifting spending at the same time.

Rate rises are a brake on one wheel. They squeeze the 30- to 54-year-old mortgage holder, including thousands of households across Western Sydney, while paying older and wealthier deposit holders more. That group keeps spending on services, which is exactly where inflation is stickiest.

As I told The Adviser, the practical step is simple. Work out now what another quarter of a per cent adds to your repayments. On a $750,000 loan that is roughly $120 a month; on $1 million, about $165. If that is tight, or two more of them would be, have the conversation with your broker before Christmas rather than after. A loan structured for the rates of two years ago may not be the right one for the rates of next year.

Confirm the refinance URL before it goes live, then on Wednesday add one line at the top confirming the RBA’s decision and change “this week’s” to “the September”.