Anyone whose parents lived through the early 90s has probably heard about interest rates hitting 17.5%. But while rates are much lower today, house prices have climbed far beyond what many incomes can comfortably support. So even a small interest rate increase can put serious pressure on an already stretched household budget.
Are interest rates really too high, or have mortgages simply become too big?
In this episode, Tash and Jack unpack why today's interest rates can feel more painful than the much higher rates of previous generations. They look at what's driving inflation, whether decades of cheap borrowing have made housing less affordable, and what people can actually do when their mortgage repayments keep climbing.
In this episode we'll discuss:
🏠 Why mortgage repayments can be harder to manage today than when interest rates reached around 17.5% in the early 90s, despite rates now being much lower.
📊 What Australia's inflation figures actually measure, and why established house prices, land and mortgage interest aren't included in the CPI basket.
🏦 Why the Reserve Bank raises interest rates to tackle inflation, and Jack's argument that government spending is part of the problem.
🌏 How Tash manages around $1.1 million in debt, and why seeing home loan rates advertised at 21% in Kazakhstan put Australia's rates into perspective.
📈 How years of cheap borrowing may have helped push property prices higher, benefiting existing owners while making life harder for younger buyers.
💰 How one of Tash's loans jumped from a 2.6% fixed rate to 7%, and why refinancing could save her around $8,500 over five years.
🔄 The mortgage loyalty tax, why staying with the same lender can cost more, and how offset accounts, insurance and subscriptions fit into the household budget.
🔒 The trade-off between fixing your mortgage for certainty and keeping a variable rate, even when nobody knows where interest rates are heading.
🏡 Why stamp duty can discourage people from downsizing or moving closer to work, and whether an annual land tax would make more sense.
☕ Why reducing spending isn't the only response to rising costs, and how Tash and Jack think about earning more, cutting expenses and keeping the things they enjoy.
The big takeaway? Interest rates are only part of the affordability problem. The size of your mortgage, your income and the price you paid for your home can matter just as much as the rate itself. And while nobody can predict exactly where rates are heading, understanding the choices available can be more useful than simply hoping they'll come down.
Disclaimer:
Any advice is general and does not consider your financial situation needs, or objectives, so consider whether it’s appropriate for you. You should also consider seeking professional advice before making any financial decision.
Pearler is an Authorised Representative 1281540 of Sanlam Private Wealth Pty Ltd AFSL 337927. Read the FSG available from https://pearler.com/financial-services-guide
If you are considering any of the products we spoke about during the show, be sure to read the Product Disclosure Statement & Target Market Determination available from the product issuer’s website before deciding.
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