Buckle up for higher rates: Nine out of 10 predict rate hike for 2022


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Nine out of 10 expect a rate rise, online shoppers save over $1300, and 2021 "as good as it gets". Here are five things you may have missed this week.

Buckle up for higher rates: nine out of 10 predict rate hike for 2022

The Reserve Bank may have kept the cash rate on hold at 0.1% in April, but we're not off the hook yet.

interest rates to rise in 2022

A Finder poll of 34 industry experts and economists, found 88% are forecasting at least one rate hike before the year ends. Some believe we could see several rate rises. This explains why banks have already increased rates across over 400 fixed rate home loan products in the past few weeks, in some cases, hiking the fixed rate by up to 0.75%.

Finder's Graham Cooke says, "This indicates lenders may be anticipating not one, but an avalanche of rate rises later in the year."

Shane Oliver, Chief Economist at AMP Capital, notes, "The RBA's objective of full employment has been reached, wages growth is picking up, inflation is pushing well above target, and the Budget will add in more stimulus this year. So the conditions for a rate hike will be in place by June."

Finder estimates that a 75 basis point (0.75%) increase in interest rates would raise the average Aussie homeowners' repayments by $265 a month - from $2761 to $3026.

Online shopping shaves $1369 off annual grocery bills

When it comes to grocery shopping, an estimated one in three Australians are swapping the traditional trolley push down supermarket aisles for digital convenience. And according to ING research, doing the weekly grocery shop online can see shoppers save around $1369 annually - and claw back the equivalent of an extra-long weekend in time savings.

One in three households that grocery shop online say their main driver is a chance to cut out budget-busting impulse buys.

Amy Cunningham, Head of Digital at ING Australia says, "Buying groceries online could be one of the easiest ways to save money. The $1,369 saved by the average shopper may cover two months' of utility bills."

2021 as good as it gets - if you tick a few boxes

Last year delivered more than its share of COVID challenges but Rainmaker Information, the publisher of Money, says for super fund members who are also homeowners, 2021 was as good as it gets.

The local sharemarket dished up gains of 17% last year, pushing up super fund returns to 15% - the third-best calendar year return for super in 17 years. Meanwhile homeowners saw the value of their properties jump more than 20%.

Rainmaker Information crunched the numbers and found a super fund member who started the year with $100,000 in super, had an average house and owned some shares, made about $170,000 tax-paid in 2021. And that's on top of the $63,000 median salary.

"They made nearly a quarter of a million dollars, and only one-quarter of that was due their salary," says Alex Dunnin, executive director of research at Rainmaker Information. "The big surprise in these results is that while everyone is talking about house price rises, superannuation has actually been a better long-run investment."

OneTwo rewards extra repayments

Making extra repayments on your home loan is a simple way to clear the slate sooner and save a bundle in interest in the process. And one lender is rewarding customers who do just that.

Mortgage industry newcomer OneTwo Home Loans will match any additional loan payments made in the first six months of the loan, up to $2,500 in total.

OneTwo's variable rate is just 1.89%, and a loyalty discount means that for every 5% of the loan balance paid down, the rate drops by 0.03%, to a maximum of 0.15%. So you could end up paying as little as 1.74%.

The catch? At present, OneTwo is only available to refinancers, and there is no redraw facility though OneTwo says this is 'coming soon'.

It's official: Passive outperforms active

Exchange traded funds (ETF) tend to use a passive approach to investing, aiming to mirror the returns of a given market index or benchmark. But not everyone is a fan. After all, why not try to beat the market with an active strategy?

It sounds good in theory. The catch is that it is notoriously difficult to outperform investment markets - especially year after year.

The latest SPIVA Scorecard, compiled by S&P Dow Jones Indices, should help settle the active versus passive debate. It confirms just how few actively managed funds beat the index.

Last year, the Aussie sharemarket gained 17%, yet 42% of actively managed Aussie share funds failed to achieve this return. Over the past five years, 73% of active funds were beaten by the market, and over a 10-year timeframe, 80% earned below market returns.

This is not a one-off result. As SPIVA Australia Scorecard notes, "We have consistently observed underperformance for the majority of Australian active funds in most categories over longer periods."

It makes a passive approach look appealing, especially given the very low fees of index-based ETFs, which can be below 0.5% annually.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.