Newsletter
August 2022
Click on the link to download our August 2022 Newsletter, or read the articles below.
Mortgage Borrowing Strategy
Tony Alexander’s Quarterly Market Update for Advice Knight Clients
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The Reserve Bank has recently lifted its official cash rate to 3.0% and intends taking it to 4%, probably before the end of the year. In response, banks are lifting floating mortgage rates for which funding costs are closely related to the level of the cash rate. But fixed mortgage rates have held steady after falling 0.2% - 0.4% since mid-June.
Final Word
‘Invest in inflation.
It’s the only thing going up’
Will Rogers.
It sure can feel like that at the moment – have you bought cheese or butter lately?! The consumer price index (CPI) increased 7.3% in the June 2022 quarter and sits at a 32 year high. Unfortunately, much like toothpaste – once inflation is out, it’s very difficult to get back in.
I do feel that there is a good chance that the Reserve Bank is at risk of correcting too rapidly here and there is a real possibility that they will over tighten in much the same way they over loosened during 2021. Many mortgage holders are yet to refix and will get a sharp jolt to their household budget when rolling from there 2 -3% interest rates they have been enjoying onto the 5-6% rates of today and that disinflationary force is yet to take effect.
If they do go too hard on inflation, I fear the recovery could contain more cracks than Humpty Dumpty after suffering his great fall, but unfortunately experience is something you don’t get until just after you need it!
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Malcolm Knight
Director, Financial Advisor