Home > Articles

The interest rate dilemma... to fix or not to fix?

“Will they or won't they?” That's the question many people are asking of the Reserve Bank as it meets to consider interest rates next month. It seems like a common question which is always on people's lips.

In March this year the RBA did what many had fretted about - they increased rates by 0.25%, the first hike in more than 14 months.

The RBA weighs up many aspects of the economy before deciding on any rate movement. Currently inflation is the focus of some attention - this year it may exceed the Government's targeted range of 2-3% pa, which would certainly trigger a rate rise. Having said this, the March figures came in below expectations. Another inflationary pressure is the labour shortage being experienced in the resources and construction sectors; this has caused wages growth as companies struggle to attract suitably qualified workers. The current high oil price and growth in employment will also attract the RBA's attention, as will the Australian Bureau of Statistics calculation of total housing finance commitments in March at a 15 month high.

So while the RBA did not increase the cash rate in April, a rise before November 2005 may well be on the cards.

Our advice is - don't panic and don't stress about future volatility! Consider a rate hike as a 'call to action' to make sure you have the right loan. Take a careful look at your current mortgage arrangements in light of a possible increase.

If you don't like what you see, please give me a call. There maybe a number of strategies we can use to insulate you to some degree against possible interest rate rises.

For further information please contact Mike Lloyd at mike@fusionfinance.com.au

If this article interests you, feel free to pass it on.