The Good Money Conversation

From our kitchen table to yours

Hello and welcome to the good money conversation

By Tracey King and Milan Chetkovich

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Hello and welcome to the good money conversation.

Like many parents, we hope to pass on great life tips and lessons which includes how to manage your money.

With April 2022 being Financial Literacy Month, Milan and I embarked on the opportunity to bring our talents together to create some conversations that could help you and your family in life.

If you started out in 2022 with some new financial and organisational goals, taking stock of how you are going could be a good move. Whether you are saving for a house, want to reduce your debt, are trying to save for a special holiday or perhaps finally get on top of your credit card, use your time productively to see how you are going against your goals.

In each blog we aim to talk about money and finance concepts such as inflation, monetary policy and other economic indications. This is because these terms are on the tips of many market commentators tongues and you may already have been wondering what this means for your financial goals and household budget.

Economic conditions globally and in Australia

  • There are many factors at present colliding and pushing on global economies. The general economic feeling being communicated globally by commentators is that there is going to be ongoing pressures on global finances.
  • The world economy has been in a disrupted state for more than two years. A significant impact has been the COVID pandemic. Sadly this disruption has been further accentuated by the Ukrainian situation triggered by Russia.
  • There has been uncertainty in labour force markets globally as well as supply chain issues which has also fuelled inflationary expectations.
  • Further pressures on inflation are evident due to the commodity and energy crisis.
  • The RBA monitors global economic conditions and they have a range of inflationary targets that they aim to manage.
  • For the Australian home loan market, we have already seen fixed rate home loans increase over the past 4 – 5 months. Fixed rates are priced off the long term expectations of global inflation the 3 and 10 year US bond rate.
  • Whereas variable rate home loans are influenced by the RBA’s deliberations regarding inflationary effects within the Australian economy.
  • If in Australia there is indicators that inflation is on the rise due to the energy supply issues and labour force shortages, the RBA will use an increase in the offical cash rate; flowing into variable home loan interest rates. They will do this if there is a need to curb total aggregate demand (eg this includes fuel, commodities and general household goods).
  • An example of what the RBA is trying to achieve by doing this is to influence each Australian household’s expenditure on discretionary items and redirect that money into their mortgage. It could be seen as a penalty for many households who already operate on a tight budget.
  • With all these global issues and now a Federal election on the 21 May 2022, there are a number of market commentators in Australia as present who are suggesting that the RBA may decide to wait and see the inflationary effects in the economy. This is suggesting that there may not be a change in the official cash rate, which would delay the flow on into variable interest rates on home loans until possibly August or later.
  • The alternative to this commentary is that the RBA retains a very conservative approach to managing inflation and does in fact go ahead with lifting the official cash rate around or before the Federal Election.

What happens if the RBA changes the official cash rate?

Case Study

Today the average home loan is around $500,000 and the current variable rate being charged by major banks or lenders is around 2.75% per annum. The monthly repayment on a 30 year loan of this value would be approximately $ 2041 per month.


If the RBA lifted the official cash rate by 0.25%, your home loan rate could be increased by the banks to 3% per annum. The monthly repayment on a 30 year loan would then be approximately $2108.


For the average family this means a monthly mortgage payment has increased $67 per month. This could mean reducing your takeaway coffees during the working week to 3 or 4 of the days, or think about cancelling a subscription or two.

Does this mean you should consider fixing your home loan interest rate?


If you take a look at the price of fixed rate home loans at present, you will find that many of the banks have already accounted for the global expectations of inflation. In comparison to a variable rate home loan, a principal and interest fixed rate home loan for 3 years could already be approximately 1% higher than the current variable rate you may be paying.

When does it make sense to fix your home loan?

If you have a large home loan on your family home, and feel that you want to provide you and your family some certainty over your home loan repayments in the coming few years you might consider fixing a portion of your home loan. Bearing in mind, doing so means you will be paying upfront each month for that “insurance” against interest rate rises. Think about the savings you could make by retaining a variable rate owner occupier home loan and whether the shift to a fixed rate home loan is worth the costs.

Of course the $ value of the extra repayments on the fixed home loan depends upon the timing and extent of future RBA official cash rate rises.

Other things to consider is that lenders will have conditions on fixed rate loans that may prevent or restrict additional loan repayments. If you want to pay more than the standard monthly payment, you may not be able to do so. Usually fixed rate loans do not allow for a mortgage offset account or for you to pay a large lump sum (for example if you received an inheritance).

If you are needing some help to review your home loan, then you should always talk to a reputable lender or licenced mortgage broker. There are also some good websites to look at to compare interest rates, such as Canstar.

Milan Chetkovich is a licenced finance broker, operating mortgage services business – Essential Financial Services – Finance Broker Licence – 392928. Milan is a Certified Practicing Accountant, and holds an Accounting degree and Economics degree from the University of Western Australia.

Tracey King is an experienced brand, product and marketing senior executive with industry experience in financial services, banking, aged care and retail industries. Tracey holds a Bachelor of Business in Marketing from Edith Cowan University, Perth Western Australia.

The information in this Blog is general and has not taken into account your objectives, financial situation, or needs. It is not personal advice. You need to consider whether this advice is right for you, having regard to your own objectives, financial situation and needs. You may need it is important to check any product information directly from the product provider. Ensure you consider the relevant Product Disclosure Statement (PDS) or other applicable product documentation before making a decision to purchase, Aquire, invest in or apply for a financial or credit product. You may wish to seek financial advice from a suitably qualified adviser or finance broker. The writers of this Blog may receive a fee for referring you to a credit or banking provider.


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