About that rate cut
Let’s talk about interest rates.
Watching Reserve Bank Governor Michele Bullock announce the first rate cut in four years reminded me of my kids when I let them watch TV.
“You get one episode … and that’s it!” I announce, like a TV judge delivering his final verdict.
And yet they don’t even get halfway through an episode of Bluey before they start begging for another.
“Just one more! They’re not long enough, Dad! Puhh-leeease!”
(At which point I tend to fold like a cheap Aldi camping table.)
So, will they cut rates again next month, or won’t they?
Well … you’ll just have to stay tuned!
Bugger Bluey, this is like an episode of MAFS, but without the Botox.headlin And in blazers.
Yet, while the rest of the world debates what will happen in 30 days’ time, I think it’s much more interesting to look at what’s happened over the last 30 years.
Let’s take a look at my favourite chart:
Yes I know, this chart tracks every interest rate decision stretching back to the nineties.
However, given most people are going to have a home loan for 25 or 30 years (more if you’re in Sydney!), having a rubberneck at the past doesn’t strike me as the dumbest idea I’ve ever had.
Now here’s what strikes me when I look at this historical chart:
First, current interest rates don’t look that high.
Second, not one person on earth correctly called each rate change in real time (and that includes the people setting them at the Reserve Bank!).
So, where does that leave us?
Well, whenever you see a headline predicting interest rates, don’t bother reading the article. There’s a very good chance they’ll be wrong. Instead, use it as a reminder to check your current home loan rate – then call your bank and whine like my kids.
Remember, there are only two ways to pay off your mortgage quicker: make extra repayments, and lower your interest rate.
Right now the best rates are a smidge under 6% for online lenders like Unloan, which is CommBank’s Jetstar brand. Use that as the basis of the negotiation. (Just remember, negotiating with lenders is like MAFS: Banking Edition: the hotter your financial package, the more lenders will fight to shack up with you.)
Yet what if right now you’re one of those people drinking watered-down red cordial and praying to the interest rate Jesus to deliver you salvation on your repayments?
If you’re barely holding on, here’s my advice:
Panic Early.
Make the hard decisions now. If you need help, see a financial counsellor (1800 007 007) or your bank’s hardship department. Whatever you do, create a realistic plan and begin working on it. Trust me, the Bluey doghouse looks a lot cuter on TV than it does in real life.
Tread Your Own Path!