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RBA rate rise | What does this mean for you?

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By Capital Partners Wealth Planning

Wealth Adviser James McLeod sheds light on the RBA rate rise announcement and what this means for you and your family.

After a long period of anticipation, the Reserve Bank of Australia has now raised its cash rate by 0.25 percentage points following Tuesday’s monthly board meeting. This move was broadly anticipated and is the first cash rate increase since November 2010.

What does this mean for you?

James explains that for those of us without a mortgage, some of the short-term pain has already been felt, with the Consumer Price Index recently coming in at 5.1% pa for the year, primarily due to sharp increases in the price of food, materials, and fuel due to supply chain issues from Covid and the Russian invasion of Ukraine.

From a longer-term perspective, looking at the growth in value of your home should give you some peace of mind, with Perth’s residential property prices increasing by over 15% to the end of December 2021. We are also seeing higher interest for longer-dated term deposits, with 12-month rates now exceeding 2.5% pa for some banks, up almost 2% pa from 12 months ago.

James suggests that now is time to look at your cash flow and budget seriously for those with debt. Should the current projected increase in interest rates come to fruition, we will likely see variable interest rates of 4.5% pa as early as this time next year. Should rates increase by 2%, borrowers can expect their annual repayments to increase by around $6,700 for every $500,000 of debt they hold.

Feeling uneasy about what this means for you? Our team is here to help.

The information provided on this site is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different and you should seek advice from a financial planner who can consider if these strategies and products are right for you.

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