What's to come in 2024
What’s to be expected from the lenders, the Reserve Bank of Australia (RBA), and us as your mortgage brokerage, in 2024, is what we uncover in our last Black and White Finance update for the year. We look at interest rate forecasts, explore what product and policy-related changes we can expect from the banks, and lastly, our commitment as a business to you. Hopefully, you can put your feet up and enjoy quality time with your loved ones this festive season before it all starts again!
RBA rate predictions - are we done and dusted?
If our economy continues in the direction that it's been in of late, we shouldn’t see another rate hike, especially if you look at our savings, CPI or GDP figures, is what the experts are predicting. AMP’s chief economist, Shane Oliver, believes the RBA has tightened more than necessary, and believes there’s only a 40% chance that the RBA could increase rates again in 2024. He also suggested that there’s a high risk of recession. “Our base case is that the RBA has reached the top and we see it cutting rates in the second half of 2024”, he said. If we look at the below 3 points, maybe he is on the money.
1. CPI is getting closer to target: The Consumer Price Index (CPI) figures for October, as announced by the Australian Bureau of Statistics (ABS) showed retail sales and annual inflation falling to 4.9 per cent in October from 5.6 per cent in September (see image below). This means that the spending levels are getting closer to the RBA’s target and going in the required direction.
2. GDP is lower than forecasted: Gross Domestic Product (GDP) which is a measure of all final goods and services produced, is also slowing. Data for the September quarter, showed the economy as an aggregate, only grew by .2 per cent where forecasts were for .4 per cent.
3. Savings are eaten into: The ABS also showed this week, that our savings have fallen to the lowest level since December 2007. The ABS made clear that a lot of our income is going to higher mortgage repayments, higher taxes, and higher-priced goods and services. Gareth Aird, the Head Economist from the Commonwealth Bank, said interest paid on housing debt rose by 70.6 per cent over the past year.
It’s not clear yet to say that we are done and dusted but there’s clear signs that the economy is slowing and the full effect of these rate increases is being felt, especially by borrowers. It wasn’t a surprise for any economist, that the RBA held rates steady in December because of these attributing factors.
While there’s no RBA meeting in January, they will meet in February and decide on interest rates then. The focus will be on the December quarter CPI inflation figures, which will be released on 31 January 2024. It will include the retail sales figures from Black Friday, Cyber Monday, and Boxing Day sales and the jobs data for the quarter – we will be watching this closely.
Bank product and policy changes to look out for in 2024
Even if rates hold or go up one more time before coming down at the end of 2024, the banks are already doing their own thing, independent of the RBA’s moves. Typically, we see the RBA move and then the banks follow. But at the end of 2023, we’ve seen pressure on the banks and their margins. Volumes are down and servicing is tight on both a commercial banking and residential lending front, so profits are down.
Banks have had to increase rates, to make back some margin, with small increases. We see this potentially continuing into 2024, and the banks are likely to continue to raise their interest rates outside of the RBA’s cycle, which is moving to 8 meetings in 2024, down from 11 as the RBA has previously done.
ANZ just this week, for home loans, reduced the discount that they are offering new to bank customers by .10 per cent. This effectively means that new to bank customers will pay .10 per cent more, than before. Also this week, Macquarie Bank announced that they are increasing variable home loan rates for new loans. Already this year, AMP, Suncorp, and more have done the same.
We see this as a trend generally for the banks, and those more at risk are the 3rd tier or online lenders, who don’t have the strength or balance sheet of a big bank, to manage these rising pressures. We need to be careful of those being the absolute cheapest now, when going into the next 12 months.
We will likely see lending conditions stay tight for a lot longer and the Australian Prudential Regulation Authority (APRA) this week didn’t make things any easier. They said that the banks must continue to maintain their 3 per cent buffers on top of current rates when determining serviceability for home loan borrowers. The banks will continue to ensure you can afford your future repayments and include a buffer to be safe by adding 3 per cent to your 6 or so per cent home loan, so 9 per cent is the rate being used for borrowing capacities and is likely to remain for a while. Some lenders out there however, for refinances, are allowing a 1 per cent buffer to be used on top of the actual borrowing rate to determine borrowing capacity with a few strict rules to abide by.
Black and White Finance, going into 2024
Despite the challenging environment, we’ve had a lot to celebrate in 2023. We’ve continued to grow our diversified team, supported our community, and will continue both into the new year. We’ve helped more borrowers than ever before which is something to be super proud of. We’ve invested in technology, automation, AI and cyber security platforms to help keep your financial information safe and secure. And with two-factor authentication and encryption, we will continue to protect your data. We have strengthened our relationships with all the lenders and have even brought a few more onto our panel.
We’re excited to announce that we have a new location now too. Our brand new office is at 404, 65 York Street Sydney NSW 2000, which we’ve worked our backsides off for and it’s bigger and better for you. We have a bit of a surprise for our visiting clients which we can’t wait for in the new year.
Final thoughts
The RBA is likely to keep rates high, and the banks are likely to keep things tight for a while. We will pay close attention to these out of cycle rate moves and everything else that these banks do. The predictions are for rates to fall at the end of 2024 and we believe this to be true too, or so we hope.
We thank you very much for your support, we don’t take any of it for granted. Thanks for the honest feedback and reviews too in 2023. We look to continue keeping our service special for you and hope to only improve on this into the new year. From all of us here at Black & White Finance, we wish you and your loved ones all the very best for this festive season.
Enjoy your Sunday & the rest of your weekend.
If you want to know more about the different rates, terms, or bank specials on offer at the moment or just have a general question, please send a note to peter@blackandwhitefinance.com.au or click the start today button a little lower. With the help of our amazing Mortgage Broker Sydney – Black and White Finance team, we will be able to support you.
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