The Reserve Bank has announced the first interest rate increase in more than 11 years taking the cash rate up to 0.35 percent. With all major banks deciding to pass the increase on in full this will add $65 a month to repayments on a $500,000 mortgage. This coupled with high inflation presents some challenges for those with high debt levels who may have to cut back on non-essential spending.
The pandemic has had a significant impact on interest rates and with the official rate now sitting at 0.25 percent retirees are having to re-evaluate their portfolios to ensure their investments are providing sufficient income. The hardest hit are those who are heavily invested in cash as the returns are not what they used to be. In this environment, we are encouraging our clients to seek advice and to consider rearranging their portfolios to include a diversity of asset classes that can deliver higher returns over the long term.
