Predicting interest rates is fraught. The illusion of stability distracts us, and then woompa. When the RBA, with the battalion of PhD analysts, get it wrong what chance do we have?
And then there is the classic joke about economists:
“They’ve successfully predicted eight of the last two recessions”.
However, we do believe that we are approaching peak interest rates.
There will be just one or two 0.25% increases and then a sloping plateau of rate cuts.
Though how quickly the banks pass that on will be the million-dollar question. They are making record profits right now because of the interest rate increases. And senior management love their performance bonuses.
But here are the reasons why we believe the peak is near:
- Global inflationary pressure is deflating. In the US and Europe inflation is already on the downward slope.
- There is always a few months lag between interest rate rises and the impact on the economy.
- Household spending is slowing right down.
- The media howls about the mortgage cliff, for those on fixed interest rates, unnerves people. And fear is contagious.
- So hold on. Adjust your spending and you can ride this out. In a year’s time, this will all have been a blip.
However, if you are concerned, don’t let fear or indecision overwhelm you. Take action book a complimentary Financial Health Check and let’s create a path forward, and peace of mind.