- Director of Zippy Financial Louisa Sanghera says Aussies should watch their Christmas spending with inflation concerns on the horizon
- Ms Sanghera three percentage point buffer may make it difficult to obtain finance
- However some inflation pressures appear to be temporary, so borrowers need not panic
A leading Australian mortgage broker is urging Aussies to rein in their Christmas spending after the Reserve Bank of Australia announced a cash rate rise of 25 basis points last Tuesday.
Zippy Financial Director and Principal Broker Louise Sanghera said she believes the people have a part to play in helping control inflation.
According to Ms Sanghera, a key part of this will be in fighting the urge to splurge during the holiday period.
“If we want interest rates to come down, then we all need to do our bit to help reduce inflation, including reining in spending where possible.”
Louisa Sanghera, Zippy
“Inflation is still far too high and with the holidays approaching, I am worried that people will splurge money they don’t have on presents, which will add further
pressure to inflation into next year.
She added that with borrowers already feeling the pressure of rising mortgage repayments, particularly for those with variable loans, moderating their Christmas spending is vital.
Inflation could spell trouble for borrowers
The three percentage point buffer being applied to mortgage applications is also predicted to cause issues for potential borrowers, with more unable to pass finance servicing assessments.
“Prior to today’s announcement, mortgage applications were required to service using interest rates of between 7.29% to 7.54% for variable loans, which is much higher than the interest rates on the actual loans and is causing problems for many potential borrowers,” said Ms Sanghera.
“Fixed-rate home loans were being assessed against interest rates of between 8 and 9%, which is crazy given borrowers can still secure fixed home loans at in the 4% range.”
Ms Sanghera said unless inflation can be gotten under control, these interest rates will be used to assess home loan applications and will ultimately drag down property prices even further.
However, she assures borrowers on fixed mortgage rates due to expire in the second half of the year not to panic.
“It does appear that some of the inflationary pressures are temporary, so we may
well see interest rates moderating earlier than predicted.
“I have been receiving phone calls from borrowers who want to refinance now even
though their fixed rates mortgages are not due to expire for a year or more and the
rates on offer now are just off the charts.”
Ms Sanghera advises borrowers to focus on managing their current and future mortgage repayments, including keeping a keen eye on their spending over the holiday season.
