By Murray Nicol

In a widely expected move, the RBA lifted the official cash rate to 1.35%. Our expectation, which has been flagged very much by the RBA and pretty much by every economic pundit, is that there will be more increases in the cash rate to come over the course of this year.

The implied yield curve of the ASX 30 Day Interbank Cash Rate Futures is pointing to a sustained increase in the official cash rate to over 3.0% at the start of 2023. Even if this expectation falls short, it is a major change in the ‘cost of money’ we have seen in the last few years.

The intent from the RBA is to reduce inflation which naturally means a potential reduction in the price of assets with the main concerning major asset for most Australians being the value of their home. This also relates to the ability for those of us with a mortgage (especially new mortgage holders) to continue to pay their loans and not be forced to sell or go into default.

An effective, robust and well considered Financial Plan takes into consideration periods where the Economic Cycle may turn downwards. With the expectation that interest rates will continue to increase, is it time to review your Financial Plan?

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