Have Interest Rates Peaked?

05th Jul, 2023 | Articles, In The News, Interest Rates

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Bouris has appeared on Channel 7’s Sunrise, to call for the RBA to “move the target”, referring to the RBA’s target of returning inflation back to 2 - 3%.

Despite predicting another rate rise, Mark Bouris has celebrated the RBA’s decision to hold the cash rate at 4.10% in July.

It’s the relief mortgage holders have been crying out for over the past 6 months, as interest rates have increased at a record 4% in just 14 months.

Bouris has appeared on Channel 7’s Sunrise, to call for the RBA to “move the target”, referring to the RBA’s target of returning inflation back to 2 – 3%.

“Change the target”: Mark Bouris “glad” interest rates are on hold, but wants to see change.

Bouris said, “Most people have taken the view that we’ve reached the peak of the [rate hiking] cycle, because inflation has peaked and is starting to trend down.” 

“Our last inflation read went from 6.8% to 5.6%. If you look at the adjustment…it’s heading in the right direction. And the question is, how do we get it from 5.6%, down to 2%? Which is where the RBA wants it.”

“The question then becomes: how long do they have to keep interest rates ‘high’, in order to get inflation down to the 2-3% range?”

Bouris also stressed that a key concern for the RBA should be, “what’s going to happen in the meantime to Australians?”

“Mental health problems, stress, people taking kids out of schools, people stop taking the kids to sports, people just stop spending everywhere.”

“What is going to be the net effect of this ravage” on Australian households?

What’s the solution?

Economists may argue that hiking interest rates is the only answer to reducing inflation, however Bouris offered a different solution when asked what he would do were he running the RBA:

“I would probably look at adjusting the inflation target. Why do we have to get down to 2 – 3%?”

“Given that we just had an extraordinary COVID period, extraordinary supply chain interruptions, now we’ve got extraordinary inflation, which we haven’t seen for a long time. We’ve had extraordinary interest rate increases.”

“I was running the show, I’d just sit back. Let’s just wait and see what happens. Let us drift down to 2 – 3% over a longer period of time. We don’t need to get there in a 12 month period.”

“I agree with what they’ve said”

Bouris also appeared on Sky News Australia to express his relief at the fact the RBA has held interest rates in July. 

“I’m very glad they did not put the rates up,” Bouris said, “what the RBA said in their statement today, I actually agree with, that it is time to pause.” 

“It’s time to look at the effect of the 12 interest rate rises we’ve had already.”

Mark Bouris reacts to the RBA’s decision to hold rates on Sky News Australia

The impact on households

When asked whether large numbers of borrowers are starting to struggle with a drastic increase in mortgage repayments, Bouris offered that YBR Home Loans customers have not yet put in “many requests for hardship.”

“Our arrears and delinquencies (or borrowers failing to meet their mortgage commitments) are not rising very much.”

“But I have to say this, we do have a very large percentage of our customer base that we lent to in 2021 or at the beginning of 2022, who opted for fixed rate home loans. A lot of those borrowers only started coming off their fixed rates in around March this year, and the bulk of them are probably going to come off their fixed rates towards the end of this year.”

“That’s important to note because we haven’t really seen the net effect of these high variable rates.”.

“Secondly, one of the things that’s worth noting is that lots of our customers are taking second jobs and third jobs and doing all sorts of different things.”

“Because unemployment is so low, there’s lots of opportunities for people to work overtime, second jobs, something on the weekend, etc. People’s propensity to do these sorts of things,  post COVID, has become quite strong.”

“So I think low unemployment is a reason delinquencies have not become a thing at this stage.” 

More concerning for Bouris, is the RBA Deputy Governor, Michelle Bullock, calling for an increase in the number of unemployed Australians, to further ease inflationary pressures.

“If what Michelle Bullock is saying is right, that we’re going to hit 4.5% unemployment in a year’s time, then I’ll be worried.” Why? Because that would mean hundreds of thousands of Australians losing their jobs.

Take Control

Debates will continue to rage on about the RBA and interest rates, but the question on the minds of mortgage holders remains: what happens next?

As a borrower, use this pause in the rate cycle time to plan. Make a budget and stick to it. Start to research and understand whether your current home loan is competitive. Or better yet, start a conversation with your mortgage broker. 

A broker takes the hassle out of navigating the complicated home loan market alone. 

If you’ve got a question about your loan, interest rates, or your property journey, we’ve got answers. Start a conversation with a YBR Home Loans mortgage broker today. 

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