Is a recession on the cards? Here’s how homeowners prepare

By Cameron Thomson · · 2 min read
Fact Checked

The risk of a recession could be as high as 80% over 2023 and potentially 2024, according to internal Reserve Bank of Australia (RBA) research released under a freedom of information request. 

The modelling, made in September 2022, found that the risk of a recession by September 2024 could be as high as 80%. The research found that if a recession were to occur, it would be over the course of the next four quarters with a 40% to 60% chance of a recession in September of 2023.

Whether the RBA can get inflation down to its 2-3% target without an economic contraction and/or mass unemployment remains to be seen. However, for homeowners, this could mean further interest rate hikes and more expensive home loans. 

So, the question is, what can homeowners do to protect themselves from further rate hikes and potential recession risks?

Recession-proofing measures home owners you can take

While no one can predict the exact timing or severity of a recession, if it happens at all, the grim predictions by the RBA research means that being prepared is important. 

  • Build an Emergency Fund: Establishing an emergency fund is crucial during uncertain times. Aim to save at least three to six months of living expenses. This fund can be a safety net in case of unexpected job loss or financial difficulties.
  • Reduce Debt: High levels of debt can be burdensome during a recession, especially on top of a mortgage. Prioritise paying off high-interest debt and consider debt consolidation so that, instead of paying multiple loans, you only have one loan to deal with. 
  • Refinance your home loan: Feel like your home loan isn’t as great as you want it to be? Refinancing your home loan is a great way to get a better deal for your mortgage. Maybe you feel like you can get a better rate, or are you looking for an account with an offset with it? Refinancing can let you get a loan with a provider that helps you through the tough times. 
  • Build up your offset account: If your mortgage has an offset account, it might be a good idea to start making regular deposits. Not only will it reduce the interest on your payments—which is even more important due to interest rate hikes—but you’ll also have a place to keep emergency funds.

Whether there is a recession or not, making sure you’ve got the home loan that’s right for you is important. At Mozo, we have comparisons on a bunch of refinancing home loan providers, so that you can get the mortgage that works well for you.