Interest rates

Economy: the winners of the interest rate hike revealed

Homeowners and renters are bracing for more bad news with interest rates set to rise again, but some people are benefiting more than others.

Household budgets are being pushed to their limits after inflation hits a whopping 6.1% and pressures on the cost of living, including grocery and fuel prices, continue to mount.

But financial experts say parts of the community are enjoying economic success during this difficult time.

So who are the winners from rising interest rates?

Financial planner and Edith Cowan University lecturer Damon Brown told NCA NewsWire there were two big winners – retirees and people who have locked in fixed rates before the cycle changes.

“Retirees who invest in cash have struggled for five years because the interest rates on their money are very low and lower than Centrelink estimates they are earning,” he said.

“For the elderly, Centrelink sees them as the old age pension they can receive.

“It’s called presumption, which is what the Centrelink assumes they can make their money, but they may not actually make that money.

“An example could be my mother who invests all her money in cash. She has been receiving 1% interest for a few years, but Centrelink assumes she earns a little more than that. And so she receives less rights to Centrelink.

Mr Brown said people who had locked in fixed rates before the cycle change, like him and his wife who got a rate just under 2%, were also doing well.

“We actually stalled for three years a year ago, so we have another two years to make a difference,” he said.

Daniel Kiely, senior fellow at the Bankwest Curtin Economics Center, told NCA NewsWire that rising interest rates aren’t necessarily a bad thing.

“If the rising interest rates we are seeing in both Australia and other global jurisdictions trickle down to the economy and in turn lead to lower inflation, we will all be winners in the long run. .” he said.

“Lower inflation will make a global recession more unlikely.”

In the shorter term, Dr Kiely said savers would get higher returns on their savings accounts, but the speed at which this happened would vary from bank to bank and by account type. ‘saving.

“Retirees can also benefit, if the savings supplement another source of income such as a pension,” he said.

“However, for savers and retirees to fully benefit from these returns, inflation will need to come down significantly.”

Dr Kiely said there was a double-edged sword for potential owner investors.

“Higher interest rates can stem house price increases and help those saving for a home,” he said.

“But higher interest rates will also reduce the borrowing capacity of many people wishing to enter the housing market.”

Domenic Romeo, LCI Lending partner, said there were still more losers than winners.

“However, people who have savings in a time deposit or savings account will benefit from higher interest rates,” he said.

“Some real estate investors may be in a better position to buy property, also due to lower house prices.”

In this month’s Finder RBA Cash Rate Survey, 26 experts and economists agreed the cash rate would change on Tuesday, with 23 predicting a further 50 basis point increase.

This would take the spot rate to 1.85% in August.

“A 50 basis point rate hike will see the average Australian homeowner pay an extra $610 a month compared to what they were paying four months ago,” said Graham Cooke, head of consumer research at Finder. .