The RBA - Speaking loudly but carrying a small stick

So whereas the “no rises” scenario was unlikely, I don’t agree with most economists that there will necessarily be several rate rises or as ANZ’s chief economist Saul Eslake puts it “interest rate changes are (as the Americans say) like cockroaches - there’s never just one of them”.

This might be the way the Bank is thinking now. But remember that, because of the size of people’s mortgages, the last time rates were increased by just 0.25 per cent they had an immediate and larger effect than expected. I think something similar will happen again and that this will buy the Bank time. A second rate rise may not be necessary.

Against all this, you can try two strategies to protect your own mortgage - “fix the rate” or “pass the parcel”.

Normally you pay for fixing - as it’s a form of insurance against a rate rise. But markets are sometimes slow to react to emerging news. Right now, for no particular reason Queensland lenders offer some of the best value in fixed rates. One leads the national market with a special of 6.49 per cent - that’s around basic variable rates locked in for three years which is pretty enticing. Another offers 6.6 per cent with complete flexibility - enabling additional repayments and redraws whenever you want.

You can also stay variable and play “pass the parcel”. Competition continues to push lenders’ margins down. Chances are you can charge a fair bit of any interest rate rise to lenders, by switching to a similarly featured loan at a lower rate.

One thing is for certain, we don’t really know what’s happening. Everyone is guessing. And economists don’t have a good record of picking the “turning points” of economic cycles. Maybe we’re at one right now.