More interest rate rises — as is almost certain between now and Christmas — will put even further strain on lawyers’ hip pockets.

In its June interest rate decision — the fifth for 2023 — the board of the Reserve Bank of Australia decided to increase the cash rate by 25 basis points to 4.1 per cent.

RBA governor Philip Lowe said, following the announcement of the rate decision, that inflation in Australia has passed its peak but that at 7 per cent is still too high and it will be some time yet before it is back in the target range.

“This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable time frame,” he said.

“High inflation makes life difficult for people and damages the functioning of the economy. It erodes the value of savings, hurts family budgets, makes it harder for businesses to plan and invest, and worsens income inequality. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. Recent data indicate that the upside risks to the inflation outlook have increased, and the board has responded to this. While goods price inflation is slowing, services price inflation is still very high and is proving to be very persistent overseas. Unit labour costs are also rising briskly, with productivity growth remaining subdued.”

“Growth in the Australian economy has slowed, and conditions in the labour market have eased, although they remain very tight. The unemployment rate increased slightly to 3.7 per cent in April and employment growth has moderated. Firms report that labour shortages have eased, although job vacancies and advertisements are still at very high levels,” Dr Lowe continued.

“Wages growth has picked up in response to the tight labour market and high inflation. Growth in public sector wages is expected to pick up further, and the annual increase in award wages was higher than it was last year. At the aggregate level, wages growth is still consistent with the inflation target, provided that productivity growth picks up.”

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In conversation with Lawyers Weekly, LHL general manager Aylin Unsal said that the broking firm expects that banks will pass on today’s increase to borrowers within the week.

“The current average interest rate range for residential loans we are seeing is approximately between 5.4–5.7 per cent, depending on the product and your borrowing profile. Today’s increase will lead rates to rise by a further 0.25 per cent,” she outlined.

“Many lenders have announced plans to discontinue their refinance cashback offers, with some already expired. Therefore, if you have been contemplating refinancing, we recommend you speak with your broker as quickly as possible to take advantage of the extra cash boost.”

For both buyers and refinancers, Ms Unsal went on, higher rates mean lower borrowing capacity.

“Banks generally assess your affordability with a 3 per cent buffer above the offered interest rate to ensure you can keep up with repayments. If you are thinking of purchasing soon, we recommend you get your pre-approval now, as many lenders will have an option to lock in your interest rate for three months while you search,” she advised.

“If you’re someone who tried to refinance but were told you didn’t service the new loan, a major lender is now offering a reduced buffer at 1 per cent to give good borrowers greater flexibility.”

“If you are feeling financially distressed, your lender should be able to provide temporary options to assist your situation. We recommend anyone in this situation to contact their bank directly. Doing so will not impact your credit history, and it is better to reach out before falling into arrears.”

While the future can feel unknown, Ms Unsal outlined, lawyers should know that their advantaged position with lenders has not changed.

“Exclusive benefits, such as waived lenders mortgage insurance when buying with a deposit less than 20 per cent, are very much available,” she noted.

“As long as you do the due diligence of being prepared and have a good broker by your side, now is a great time to make a move.”