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“I think there’s every chance of a couple more rate rises.”
That’s Mark Bouris’ blunt analysis following the release on Tuesday of the RBA’s minutes from their most recent Board Meeting.
Speaking to Sky News Host, Peter Stefanovic, Bouris said: “Inflation is proving to be extraordinarily stubborn, at 7%.”
“I looked at the RBA minutes that came out yesterday and I didn’t get any encouragement from those minutes whatsoever.”
“I was thinking to myself, ‘maybe we’re at a pause stage, we’re actually on the other side, I think the feeling I got from those minutes was that they’re more than likely to put rates up.”
Mark was referring to the board minutes that stated: “[Board] Members also agreed that further increases in interest rates may still be required.”
There are now economists predicting that the official cash rate could increase by a further 0.95%!
Bouris said, “I don’t know whether our economy can withstand that. One of the things that there is a lot of talk around at the moment is that there has been some internal analysis done on the economy at the RBA. And that internal analysis has revealed that there’s an 80% chance of us going into recession.”
“I wonder whether or not that is because they are baking in assumptions that the interest rate could continue to rise as…suggested to another 95 basis points, up to 4.8%. So that would definitely put us into a recession.”
There is real concern that if rates were to continue to rise, we would start to see a rise in the number of distressed sales.
Bouris said, “I’ve spoken to a well known auctioneer in Sydney recently…and he said to me that whilst we’re not seeing mortgagee sales, he’s actually noting that there are, I don’t know what they call it, but there’s some persons sitting between the borrower and the lender, who is coming out and encouraging the borrower to put their property on the market, not as a mortgagee sale, but they’re encouraging the borrower to put the property on the market for sale”
“So that’s a bad indicator. I don’t like the sound of that.”
“People are smarter”
Bouris also appeared on Channel Nine’s Today Extra show to discuss a record number of mortgage holders opting to refinance.
Reports surfaced this week that the Banking Association is receiving up to 2500 requests per day to refinance, with Bouris stating that it shows borrowers are being smarter with their home loans.
”If you think you’ve got an interest rate that’s too high, go and try and get a better deal,” Bouris told Today Extra.
“There is often a better rate, or a better deal out there and borrowers are realising that just because they can’t afford their current position or are under stress, what will happen if they reduce their rate?”
Bouris did however warn borrowers of the effects of refinancing, and rightly so, adding that the moment you refinance, you generally re-extend your loan term, meaning your loan goes back to a 25 or 30 year repayment schedule.
“So if you’ve only got 20 years left on your loan, 25 years left, you go and refinance and it goes back to 30 years,” he said.
“So you’re basically pushing the amount of time and you’ll actually pay more interest over the next 30 years than you would have over the next 20 years, because you’re paying interest – albeit a slightly lower rate – but over a longer period of time.”
“While interest rates are high, [if you refinance to a lower rate] the repayments per month will be lower than when interest rates go down. They will come down eventually, then you have more money in the pocket to start paying your loan off faster,” he said.
“Then you’ll effectively reduce your 30 years back down to 25 years – but everyone’s got to be aware of that – they’ve got to know the strategy and put the strategy into play.”
It’s a crucial point that Bouris was keen to emphasise: there are strategies that when well thought out and acted on, can put homeowners in a stronger position when compared to just setting your interest rate and leaving it unchanged for years at a time.
In a difficult environment where rates are rising, it truly pays to have an experienced mortgage broker in your corner, fighting for your best interests to ensure you’re in the strongest position possible when it comes to your mortgage.
Reach out to us today to see if there are more suitable home loan options out there for you.