This afternoon, the Reserve Bank of Australia raised the official Cash Rate by 0.5%. The Cash Rate is now 1.85%. This has a whole lot of implications for all businesses across the economy and the strata sector is not immune.
Whilst the Cash Rate doesn't determine mortgage rates officially, all major banks take note and pass on their own increased borrowing costs to their customers who have loans with them. In the main, this is people with mortgages on property and also business loans. The costs of servicing debt are likely to increase for many people as a result of this action by the Bank.
This increase is unlikely to be the last as the Reserve Bank attempts to get rising inflation under control.
Whilst there may be a deal of doom and gloom about this, it is important to remember that interest rates are still at historically very low levels. The record lows through the COVID-19 pandemic were to keep the economy alive through lockdowns. As we return to normal, it is inevitable that interest rates return to normal too.
What does this mean for SCA (Qld) Members?
All businesses will be affected by this either directly or indirectly. If you have a business loan on a variable rate, the amount of interest you pay is likely to increase.
For strata schemes, the cost of servicing any loans they have taken out may also increase.
For our strata manager members, it is likely that mortgage holders within some schemes may run into financial trouble as a result of this rise. We encourage you to be proactive in ensuring that all levies payable are paid on time and to work with affected lot owners to minimise this issue. It is important to remember that unemployment is low and this rate increase will likely help the incomes of retiree lot owners. Most people will not be sent to the wall by this.
What is SCA (Qld) doing?
These rate rises are driven by the desire by the Reserve Bank to get inflation under control. Inflation is a problem affecting all of our members. SCA (Qld) is currently working on a series of communications and support content to help members manage this issue for their businesses and clients.
Stay tuned for further detail.