Interest rate hikes lead to the cancellation of Christmas and the holidays turn cold

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  • The cash rate is expected to reach 4% next year
  • Four in five millennials think it will impact their vacation plans this year
  • Seven out of ten households will reduce their Christmas spending

Australians suffered the seventh consecutive interest rate hike earlier this month, with the Reserve Bank of Australia (RBA) bringing the cash rate to 2.85%.

It was the first rate hike on a Melbourne Cup day in 12 years, with rate hikes causing a trifecta of Christmas gloom this year.

New research has found most Australians will cut back on spending this year, spending less on holidays and gifts, with an elaborate Christmas lunch perhaps going without a cold turkey.

The cash rate should peak at 4% and inflation peak at 8%

Until May of this year, the Reserve Bank kept pending interest rate a tan historical low of 0.1%, before upping the ante each month.

In May of this year, the cash rate went from 0.1% to 0.35%. It was the first time the Reserve Bank had raised interest rates since November 2010 – the day of the Melbourne Cup – and the first time it had changed the rate since November 2020.

In June, the RBA cut interest rates to 0.85%July saw rates rise to 1.35%August then saw rates rise for the fourth consecutive month to reach 1.85%September 2.35%October 2.6%and November 2.85%.

Industry experts expect interest rates to peak at around 3-4% by the end of next year.

In October, The Property Tribune reported an extreme scenario could see the banks’ variable rates (and not the interest rate) reach 6.5%. Much earlier in the year, before the big global challenges, a prediction was that interest rates would stabilize at around 2.25% by May 2024.

This month, Master Builders Australia Chief Economist tell the industry over lunch that rates were expected to peak at around 4% by September or October of next year. Some experts expected a little more at 4.15% or 4.25%.

7 out of 10 households have reduced their Christmas spending

Research by YouGov for Aussie Home Loans found that seven out of ten households will be forced to cut spending during the Christmas season.

It has also been found that almost three in ten Australians have already seen their holiday plans impacted by the rise in fares, while just under one in five plan to spend less on gifts.

Australians expect to spend less this Christmas, with interest rates and inflation driving up the price of everything. Image: The Property Tribune; Henry Thai.

“Now, more than ever, Australians are keen to get out and travel and enjoy the holiday season with family and friends, so it’s concerning that rate hikes are hampering those plans for so many people,” he said. said Brad Cramb, CEO of Distribution for Aussie.

“As the holiday season approaches, people are really starting to feel the pinch of higher refunds and with discretionary spending on the chopping block, holidays and Christmas gifts are the first to go,” Cramb said.

Millennials are one of the hardest hit, with more than four in five worried about the impact of interest rates on their seasonal plans; more than seven in ten Gen Xers (73%) were also affected, and one in two baby boomers.

Refinancing relief

Savings can be made through refinancing, Cramb said: “For example – if you are currently sitting on a $650,000 home loan with a rate above 5% – there are refinancing options available that could save you money. $95 per week, $400 per month. or more than $4,000 throughout the year – a significant saving for many households heading into the summer season.

Australian broker Michael Collins added: “We have seen so many mortgage holders resume their holiday plans by picking up the phone and asking questions about refinancing.

Top tips for saving money this Christmas

Aussie tips include:

  • Know your home loan and ask:
    • How fair is it in the market?
    • Is it also costing you more than necessary?
  • Take 20 minutes to take stock of your finances and your health. Ask yourself what is nice to have and what you would rather spend the most.
  • Take it easy on big purchases this Christmas, and if you’re still feeling strapped for cash, try doing some housework and doing some Kris Kringle.
  • Think about upcoming Christmas dinners and try to buy food in advance when you can, cook ahead and freeze.
  • Consolidate your credit cards and reduce them, literally.
  • Consider an offset account to reduce the amount you pay in interest on the home loan while still earning interest.

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Disclaimer: This article contains general information and should at no time be taken as financial advice to the reader. Readers should always check their situation with their financial advisors before taking any other action.

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