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What lawyers can do if another rate rise hits
Ahead of the November RBA meeting – which may see the first rise in the cash rate for five months – we explore what legal professionals should know for their own portfolios, in the wake of higher-than-expected inflation figures from the ABS.
Jerome Doraisamy
In October, the Reserve Bank decided to hold the cash rate at 4.1 per cent for the fourth straight month. Newly appointed RBA governor Michele Bullock noted, at the time, that this decision was due to “the uncertainty surrounding the economic outlook”.
“Timely indicators on inflation suggest that goods price inflation has eased further, but the prices of many services are continuing to rise briskly, and fuel prices have risen noticeably of late. Rent inflation also remains elevated. The central forecast is for CPI inflation to continue to decline and to be back within the 2–3 per cent target range in late 2025.”
As reported widely last week, the latest data from the Australian Bureau of Statistics has revealed that the consumer price index (CPI) rose 1.2 per cent in the September 2023 quarter, slightly up from the 0.8 per cent increase in the June quarter.
This leaves Australia’s annual rate of inflation at 5.4 per cent, which is down from the 6 per cent recorded last quarter (and down from the 7.8 per cent peak in the December 2022 quarter) but remains higher than what was being forecast.
As noted by ABC, the higher-than-expected inflation figures are attributable to fuel (up 7.2 per cent), rents (up 2.2 per cent), new dwelling purchases (up 1.3 per cent), and electricity (up 4.2 per cent).
The Q3 CPI figures have, as detailed by Lawyers Weekly’s sister brand Mortgage Business, shifted expectations for the RBA’s cash rate decision at its November meeting, being held on Melbourne Cup Day.
All four of Australia’s big banks, for example, are now predicting a rate hike of 25 basis points during the November monetary policy meeting to bring the official cash rate to 4.35 per cent. Economists have also been anticipating a rate hike, going back weeks.
So, what do lawyers need to know in the wake of such figures and predictions?
In conversation with Lawyers Weekly ahead of the November cash rate call, Legal Home Loans general manager Aylin Unsal (pictured) said that the September quarter inflation figures “have surprised us all”, as it “truly looked” as though the numbers were headed in the right downward direction.
“Whilst we previously thought we had hit the apex of the hikes, all major banks are now expecting an increase before Christmas,” she noted.
“Currently, the average interest rate range we are seeing for owner-occupier home loans is between 5.8–6.0 per cent. In the last week, a few lenders increased their rates, which suggests that they expect an RBA increase next week.”
“If the cash rate target does go up to 4.35 per cent, we expect that banks will pass this on to customers and increase rates by a further 25 basis points,” she surmised.
LHL retains hope that interest rates will start to come down in late 2024; however, Ms Unsal added that it is very hard to make any concrete predictions.
“If you’re someone who is feeling concerned about rising mortgage repayments and the impact on your household budget, we recommend speaking to your bank or broker to explore the best structure suited to your needs. Doing so will not impact your credit history, and it is better to reach out early before falling into arrears,” she advised.
“While the future can feel unknown, lawyers should know that their advantaged position with lenders has not changed.
“Exclusive benefits, such as waived lenders mortgage insurance when buying with a deposit less than 20 per cent, are very much available.”
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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