It might have taken several months but interest rate rises are impacting many Australians’ holiday season plans. Many are feeling the pinch of higher repayments, combined with an increasing cost of living. With discretionary spending squeezed, holidays and Christmas gifts are often first to go.
The Reserve Bank of Australia (RBA) started increasing the cash rate in May, as an attempt to slow down rising inflation. This had seen seven consecutive cash rate rises by mid-November, with the cash rate then at 2.85%. According to an October survey by the Lendi Group, more than half (56%) of all mortgage borrowers had not anticipated the cash rate to rise beyond 2.5%.
YouGov research conducted in late October also noted rate rise stress is seeing “half of Aussies change their holiday plans”, with 28% or nearly three in 10 households already admitting they have cancelled their upcoming festivities and holidays. Overall, the data revealed 7 in every 10 households have been forced to reduce spending on holidays and gift buying this season.
Interestingly, Millennials (84%) were most concerned about the impact on their seasonal plans, followed by Gen X (73%) and Baby Boomers (50%).
This comes as data has revealed half a billion in ‘lazy loans’ are left untouched by their owners over the past five years. This accounts for a quarter of the $2 trillion outstanding in the mortgage market across Australia. Around $130 billion worth of fixed-rate loans are due to expire from mid-2023. This will leave many households facing significantly higher repayments as soon as their current fixed rate term ends.
With a financial planner by your side, helping you make better short-, medium- and long-term financial decisions, you can be more confident about reducing the potential impact of these fluctuations on achieving your financial goals, and enjoy your holiday season!