Home loan Expert’s has issued a stern warning for Aussie homeowners regarding the future of interest rates in the next 18 months.
Home Loan Experts has cautioned homeowners not to anticipate a decrease in interest rates until the following year due to persistent inflation.
The Reserve Bank of Australia maintained the cash rate at a 12-year high of 4.35 per cent last month, a level that has remained unchanged since November last year. This stability followed a rapid increase in rates from a record low of 0.1 per cent in April 2022. With the cost-of-living crisis intensifying, homeowners are grappling with the burden of high interest rates and are advised to prepare for a prolonged period of elevated rates.
The latest predictions suggest that a decrease in interest rates may be on the horizon for 2025, as indicated by economists. However, the Reserve Bank’s anticipated interest rate hikes may take longer to materialize. This delay could pose challenges for homeowners, especially those with mortgages, amidst the current cost of living crisis.
Initially, there were expectations of a rate cut by the end of 2024, but with inflation persisting at high levels, this projection seems unlikely. In fact, there are indications that the RBA might consider raising the cash rate instead. The minutes from the RBA’s recent Monetary Policy Decision highlight concerns about inflation remaining above target and the overall economic outlook remaining uncertain.
As these developments unfold, it’s essential for homeowners to stay informed and prepared for potential changes in interest rates that could impact their financial situation.
The recent increase in interest rates has played a significant role in aligning aggregate demand and supply more closely. As interest rates rise, the cost of borrowing increases, leading to a decrease in consumer spending and investment.
This decrease in spending helps to reduce aggregate demand, which in turn helps to bring it closer to the level of aggregate supply. By influencing the behaviour of consumers and businesses, higher interest rates can help prevent overheating of the economy and contribute to a more stable economic environment.
