Are We Being Bullshitted To About Mortgage Rates?

Are mortgage holders on the cusp of a rate cut following 13 rate hikes in recent years?? The media is reporting that inflation has slowed and is now within target range to make this happen.

This of course feels like a massive sigh of relief for many that are battling not only higher repayments for their home loan, but also other related cost of living pressures.

But is a .25% interest rate really a big deal?

I remember when interest rates with lenders who offered fixed rates shifted from sub 2% rates up to 6.5% overnight.? On a $500,000 loan this meant that the home loan increased from $1,848.10 per month to $3,160.34 per month – overnight.? An increase to the household budget of $1,312.24 per month, $15,746.90 annual!

And the media kept mortgage holders desperately hoping and seeking a solution for higher rates with a consistent marketing barrage of mortgage rates dropping.? Throughout 2024 you would see an article every single day preaching that rate cuts were on the horizon, but nothing happened.? RBA meetings came and went, there was even a change of guard at the RBA, but things remained the same – high rates due to high inflation.

It left mortgage holders squeezed, frustrated, stressed.? Some forced to sell, some forced to make drastic changes to their budget, others lost every aspect of their lifestyle all just to keep their homes and food on the table.

A position not enviable, but real and raw following 13 rate increases in quick succession.

Now we are promised a .25% interest rate cut for February 2025, with some lenders beginning to reduce their rates…

A $500,000 loan with 6.5% interest = monthly mortgage payment of $3,160.34, $37,924.08 annual.? A .25% cut would reduce your monthly repayments to $3,078.59, $36,943.08 annual – a saving of $81.75 per month, $981 per year.

It makes you wonder if we are all being bullshitted to because…

Council rates are up.

Electricity costs are up.

Home insurance costs are up.

Health insurance costs are up.

Grocery costs are up.

And if you consider the impact of 13 rate rises plus everything else that has increased since 2020, a saving of $81.75 per month is a massive slap in the face.? It won’t have the impact for many that they think it will (removing the pressure and stress of high mortgage repayments), if anything many will seek to fix their home loan for a period of time 2-3 years, and not realise that loan application fees for fixing their loan and – saving money – could potentially equal out with no additional savings.

So what do we see as money coaches?? We see many items in the household budget that have increased, potentially greater than $6,000 per year of ‘cost of living’ increases for living expenses, plus grocery costs, pub meals, petrol AND the household mortgage.

Which means on one hand your budget has increased significantly (just with cost of living rises – not mortgage) of $6,000 per year at least ($500 per month), plus the extra $15,000 or so that your mortgage has increased since 2020.

Yet all we are focused on is watching mortgage rates, the media, the marketing, the ‘rate cut’ that will make all the difference in bettering our lives.? But what we don’t take a step back to consider is the extra $15,000 from mortgage payments, plus $6,000 (or more) from our known, fixed living expenses (on average in our experiences) is an additional $21,000 per year of costs that have been allocated to our household budgets without including groceries, debt, or buy now-pay later services etc.? This example amounts in an additional $1,750 of added costs per month to our household budgets.? Yet our focus remains on the mortgage and rate cuts because we get to save $81.75 per month shortly if a rate cut does go ahead.? Yay for us!

Something sure stinks…

Alyssa: “Come on Andrew, stop being so cynical.”

Andrew: “Well, I’m sorry, but a cynical situation deserves a cynical approach and cynical understanding.”

So, if we are all being bullshitted to (which we are), and we think we are about to have a massive reduction in our mortgage (which we aren’t), then what can we do about it?

• First: You can choose to educate yourself by understanding exactly where your money is going by developing your budget.
• Second: Understand what the media say and what the RBA does are two different things.
• Third: Don’t get your hopes up. You must always have a plan in place that is realistic and supportive of your goals!

Regardless of what the ‘economy’ is doing you can only ever be reactive to it and that’s a problem if you aren’t prepared as you are likely to have the rug pulled up from under you.? Rates go up, you pay more, rates go down, you pay less.? The only thing you can control is your own personal economy – your household budget.

If you are waiting on somebody to come and save you go and look in the mirror.? You are your own saviour and proactive action is your reward!

It’s time to…

• Start learning.
• Start budgeting.
• Start saving.
• Start investing.
• Start thriving.

And remember:

The media and the RBA are not the ones that put food on your table to feed your family, you are.

The media and the RBA are not the ones that give you a quality of life worth living, you are.

It’s up to YOU to make it count!

What we are all experiencing when it comes to cost of living pressures today is called the ‘totalitarian tip-toe’.? Where pressure is increased gradually as we get to a breaking point, and then they throw us a bone thinking that we have had a win and we all calm down.? What we don’t see is that the baseline of where we were comfortable before never gets returned to – it’s always a heightened position from where we once were.

?Closing questions for you to ponder…

• If inflation is ‘under control,’ do you notice this in your daily expenses—groceries, utilities, insurance?
• If inflation is ‘under control,’ have you noticed the cost of your groceries and insurances reducing?
• If inflation is truly ‘under control,’ why are prices still rising?
• If life continues ‘as-is’ what are you going to do differently to keep you and your family safe as the economy rises and falls?

It’s not your problem that inflation is out of control – that’s the government and the politicians, the perpetrators that caused this, however, it is 100% your responsibility to ensure that you are thriving – even in tough times.

At Your Budget Mates, we help take the stress out of money management. Want to know how we can help you gain confidence, clarity, and control of your cashflow?? Book your complimentary discovery meeting today!

Visit: www.yourbudgetmates.com.au Read More: www.yourbudgetmates.com.au/blog

When you sort your budget, you sort your life.