RBA Interest Rates 2025: What Smart Investors Are Doing About Rising Mortgage Costs

What's your prediction for where interest rates will be? November 3, 2026. Our rates are going to rise. All right. Oh, that's very optimistic. I think I know yours. We've got a government that has got absolutely no idea on how to run anything economically. But the RBA, it'll leave them no choice. And they'll have to. I'll say it will be just before the end of the financial year. I'm preparing for the worst and praying for the best. Melbourne Cup yesterday made you back a winner. I didn't, I never do. No. The last one I backed was 99, mightn't be how I. Mightn, power. She's also a little bit up for that. McCoy, I'll be deeper. I think I'll back the three in a row. I didn't get three in a row. But I remember watching that wag to school. That's how long ago was that was my last Melbourne Cup winner. I think that might have been 2005. Low risk, favorite bet are. Low risk. Is that financial advice? No, definitely not financial advice. Betting is definitely not financial advice. No, but the race at Stops Nation is great race. Another female jockey that won 10 years on from Michelle Payne. I was just listening to my Boris's straight talk with Michelle Payne that came out on Thursday last week. Hey, you got it. Just finished it yesterday. Why did they say, I'm in bed. That is. 10 years on decade. Why, when we're looking there? See Lee. Everyone else didn't have a win yesterday because the RBA held interest rates steady. Inflation has ticked up in the last quarter. We got some results back two weeks ago now. Inflation has really ticked up. Quarterly at 1.3%. If you annualise that, it's nearly over 5%. Shocking stats and everyone can feel inflation right. We wanted to touch on it today, Jared highlighting some importance. What that decision actually means. Everyone's expecting a rate cut would have been nice on Melbourne Cup Day because a lot of punters were losing money. So if you could get a little bit back on your home, they don't want to be nice. Not to be. Michelle Bullock has kept rates steady. Where does it go to from here? What's very interesting, if you look back two months ago, almost fully priced in that there would be a cut in November or December and then one to two cuts before the end of the financial year. It's now looking less and less likely. Like you said, there's inflation running at 3.2% annually. It was looking potentially like there was going to be cuts due to unemployment reporting in September. Shock and unemployment numbers going up, which is not good. The RBA has got a dual mandate, which is the inflation is one. But also the unemployment rate. So with the unemployment rate rising, I think that we did see that there was going to be an 80% cut. Not just unemployment, but under employment. So when there's people that are employed, but with not enough hours to sustain what they need and not enough income to sustain households, it's going to be really interesting over the next sort of 12 to 18 months. What happens here? But yeah, I think if you were betting on it two months ago, it would have been full-long conclusion that it was priced in that we'd be a further rate cut prior to Christmas, but not the case now. It's not going to happen. No. And in all likelihood, next year, I think that they'll pause again in December. And in all likelihood, it actually starts to raise rates again, especially if inflation ticks up. Because no one wants to see inflation at 6, 7% again. We've seen from the latest numbers the real wages in Australia have actually gone backwards for the last 10 years. We're back to 25-day levels in terms of real wages and you can feel that with inflation. You know the shops now, which is a price of eggs? Are you ridiculous? I think that's the thing. Families can feel it. Families can see that their net income they have at the end of every week or month is substantially less than what it was five years ago. And it's not getting any better. It's getting worse. Your rents and repayments for buying properties are going up. Your staples and your essentials that you need week to week. Kids education, clothes, everything is going up at a dramatic rate. You can't get out of calls or bullies or a Audi with one bag that's less than a hundred bucks anymore. How ridiculous does that sound? Because you're a hundred bucks for a bag of food these days, shocking. What do you think that is? Why is inflation continuing the way that it is? Well, if we're talking about major supermarkets and the flow and effect after COVID, we saw the increased cost after a flow on. There's nothing that stopped that leaky boat after the fact and costs continue to go up, transport continues to go up. It's this flow on effect that goes through industry, which then has people that are working in industry that are commanding more income to be able to live and sustain their lifestyle, income, creep lifestyle, creep. It just is this full circle that is not going to stop and is not going to stop anytime soon. Even with increasing rates, we still saw, for the most part, property prices maintained and asset prices maintained through a massive increasing interest rate environment over the last two to three years. The data there is that if they do increase rates, will that actually have a sustained impact on it? The first tool that Michelle Bollick and the RBA use raised interest rates, cost everyone more money because their loans are going up, pulls money out of the economy. It's sort of like we're in a two-speed economy at the moment because the government continues to spend massively on this fiscal stimulus that they're on and creating more money in the system. But for everybody else, it is affecting different sectors of our workforce. If you're in the construction industry, the construction costs are going through the roof. I talked to a lot of builders and it's very hard to get someone to sign the dotted line now because when they go through the materials cost, it's up 60-70% over the last couple of years. A lot of that is due to the energy and manufacturing sector here in Australia. We aren't here about it. We're in Newcastle now, Tomago, aluminium. Look unlike shutting the doors in 2028 because they've had such low cost fixed energy price which runs out in 2028 and their business model is not sustainable. It's a thousand jobs. You only had Anthony Abanasi, not political at all, but I hate Anthony Abanasi. Sorry. But you only had two, three years ago he was running on the election campaign. He was out at Tomago, aluminium. He was saying how good this was bringing manufacturing back to Australia. All these kind of things, they're now out of business because of this silly net zero policy I believe personally, that hardly against me. But the silly net zero policy that we've got. Now you're starting to see the nationals abandon it because they are energy-prosters. They're so high and it bleeds into everything with inflation. You think about energy goes into absolutely everything and when it is sky high, you're going to have inflation through the roof. Natural resources and energy that we do sell off, we don't sell at a high enough rate compared to other nations. So when we are doing that, we're not even getting back the money that we deserve on those natural resources. There's no doubt that energy prices in Australia are ridiculous if they're continuing to increase. We've seen that this year they're up nearly 24% year over year. And they have to go back to I think that Albo ran on his policy that $275 off your bill is what you'll get for energy. Like bullshit because my prices are 25% up this year, same as everybody else. But going back to interest rates now, Jared, pretty blunt tool, should people be looking to fix their interest rates? Again, if we look back two months ago, we saw day after day emails coming through from Lenders that fixed rates were coming down in that one, two and three year bracket. It's always a pretty good indication. They say the medium term funding costs are going to be coming down and as such, they then pass that on pretty quickly. We saw a couple of Lenders within the last four weeks rebound that back up, especially in the two and three year rates. The one year rate is not so much. They're pretty easy to fall cast for the most part. Two, three to five years is a little bit harder and is a little bit more volatile. So you're quite often see, especially in a rising interest rate environment, that those rates might be significantly higher because they're worried about it going up and beyond that. But also in a decreasing rate environment, you know, there's Lenders that are at 4.79% at the moment for two and three year fixed, which the forecast that you were looking at back in September is, you know, there's probably another three cuts pretty quickly. If you were to lock into that, you'd be in a, you know, a worse position over that time if it was to cut quickly and sustain on a downward trajectory or stop there. Trying to beat the banks at their own game run and they pay top dollar for lots of economists through these big banks to make sure that they're making more money out of you. So if they've got lower fixed interest rates than what the normal rate is, they're trying to get you to fix because they can see that interest rates are going to continue to come down. What's important is now is what you're saying is those fixed rates are starting to come back up a little bit because they are worried about the medium term financing. So they don't want you to fix because they can see, I believe, some interest rate increases in the next 12 months. Well, not all of them have come up to that level. We were saying a couple that sort of came down eight weeks ago and then six weeks ago came back up sort of halfway in between. It hasn't been a lot of movement. There's been no further cuts. There's not sort of outlandish increases to them and there's still some good rates that you can fix for a period of time. Seven out of ten loans work out that you are worse off over the term if you fix your rate though. So the ability to beat the banks is in a minority. It's not in your favor. Yeah. Yeah. But Jared, I think people are going to get pretty nervous. Sorry to cut you off there because rates did go last time that day in Christ. You got to fix your rate below 2% for four years. Anybody that did absolutely beat the banks because you went from a 2% rate to a 6% rate. I think people are going to be fearful, hesitant now that if they can fix it 4.7, 4.8 for the next two or three years, it seems pretty good rather than paying six and a half again. And then you know what your repayments are. Is there a strategy out there for someone to go probably half half? Put a foot in both courts. Yeah. Absolutely. And look, it's not, you know, even though it is financially driven, it's, it's got to not be financially driven. It's got to be based on what's best for those people's circumstance at that time, you know, because there's benefits that come with variable rates in terms of having an offset account to reduce your interest, the ability to pay it off quicker with a redraw facility, fixed usually has caps or no ability to pay extra. So that's what your payment is for that period of time. Also means that the cost of breaking that by paying it out in full or paying it down substantially could be very, very large in the tens of thousands to do so. Yeah, there's obviously costs that go and associated with fixing it and then breaking it. But if I'm just an everyday Aussie and I've got a 25-year loan for the next two or three years, I don't know where prices are going to be in terms of how much food's on the table. I want to make sure that I lock in and I think I said an alarming stat that was nearly 25% of all homeowners are in mortgage stress or getting there. So I would love to be able to fix a portion of it, just go, this is what I've got to pay over the next couple of years. Happy with that. Variable rates, I'll run the risk on it. But I need to know how much money I've got left at the end of the day to put food on the table. And it seems to me like with the RBA pausing inflation ticking up, we're on the wrong side of interest rates now, which was not the conversation you and I were having three months ago. And that's spot on. Mum and Dad might look at, they've got a 500,000 dollar loan, 400,000 on fixed. So they know exactly what the majority of their repayments are. If they are within that mortgage belt and want to know exactly what they've got left over at the end of every week or every fortnight, still got the ability with that 100,000 to target that and pay it down if they do get extra variable income or over time or bonuses. But for the most part, that that whore of it is going to stay at what it is. But yeah, certainly interesting to see what will happen over the next 18 to 24 months now, given the change we've seen over the last two months. And to foresee what's going to come is very hard at the moment. Jared, would you predict where interest rates will be November through 2026? 12 months from now? All right, we're the same as where we are now. Same, no cuts, no raises, no nothing. They're just going to sit on their hands for 12 months. Yep. What's what's your prediction? I think we're going up. US is going to keep the cloning because they've got a cracking president who's bringing down their energy cost. That's going to stir up a little people, a lot of people. But I really like the way that they're operating and bringing down their energy cost where the total and polar opposites here, our energy costs are going to keep increasing. We've got a government that has got absolutely no idea on how to run anything economically, especially energy-wise. It's probably going to get some more cracking comments around that for elbow. But the RBA, it'll leave them no choice and they'll have to raise rates. And it's a blunt tool. But I expect in 12 months time that we'll be paying higher around mortgages. Actually, I'll go to the opposite. Oh, I won't sit on the fence. I'll say it will be one cut down from where we are now. That'll be just before the end of the financial year. Jared is someone with debt. I'd love to hear that. But I'm preparing for the worst and praying for the best. You're pessimistic, though. No, I'm definitely not a pessimist. No, no, I'm always an optimist. But I'm a realist when it comes to our government policies. And I believe that they're horrible, that I'm also realist in what I think Michelle Bullock will do. And I think she'll raise rates because she'll have no other option. This is general advice in nature. Obviously, Jared and I've got no idea where interest rates are going to be. Run the a couple of mugs thinking, but we've been in the game long enough. And I did an economics degree, which means nothing because it's just a piece of paper. But I believe that interest rates will increase over the next 12 months. So if you're worried about it, please reach out to a broker to your bank. Have a look at fixing your rates if you are very nervous about putting food on the table. But definitely don't take my advice. Go and seek some independent advice yourself because this is general information only. Just a couple of mugs having a punt that didn't win yesterday. Thanks for tuning into another episode of your wealth playbook. If you could help us out in any way, the biggest benefit that Jared and I and also Danny will get is if you can subscribe to this podcast on your favourite platform and maybe share it. Send it to somebody that will benefit. The information in this podcast is general and does not consider your personal objectives, financial situation or needs. Before making financial decisions, consider whether it is appropriate for you and seek professional advice. Pass performance is not a reliable indicator of future results. If you'd like to discuss today's topic further, reach out and we would love to help. Jared and I have not assessed your individual circumstances. Therefore, this podcast is general in nation and for informational purposes only. This is not personal financial advice. There are so many advisors and brokers in Australia. You'll find one that you resonate with. This is for informational purposes only or maybe just used your own life.