Today, the RBA held the cash rate at 3.60%, and in doing so offered some Easter relief for Harbour City households paying off a home loan.
In what was viewed as a line-ball decision by market analysts, the Central Bank eased off on its swift rate-rise approach over the last year.
With inflation easing slightly in the last month, another hike was viewed as unnecessary.
The Central Bank explained its pre-Easter gift today, noting that ‘The Board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook. The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt.’
However, the RBA kept its options open, adding that some ‘further tightening may well be needed’.
So, a little good news tempered with the possibility of another hike.
On the eve of the one-year anniversary of this aggressive rate rise policy, there are some who are frustrated by corporate profiteering while everyday Sydneysiders with home loans bear the brunt of almost a year of rate rises and a cost of living explosion.
The RBA conceded this today, saying that while some households have substantial savings buffers, ‘others are experiencing a painful squeeze on their finances’.
The RBA for its part bases its decision not just on the inflation rate but also employment, spending and investment levels. International factors are also considered.
Clearly the data suggested another rise would be counter-productive. However, Australian households aren’t out of the woods just yet. Fears of a recession later this year are growing. Those worries centre on the scenario later this year for many mortgage holders: the so-called “mortgage cliff”.
When a fixed term mortgage ends, there is the option to either enter into a new fixed rate or switch to variable rates.
Either way, for many in Sydney, what they’ll pay off each month will skyrocket given their original rate would’ve likely been set much lower.
But for now, at least, inflation looks to have peaked.
‘Goods price inflation is expected to moderate over the months ahead due to global developments and softer demand in Australia,’ said the RBA.
As for longer term goals, the RBA is seeking to return inflation ‘to the 2–3 per cent target range while keeping the economy on an even keel, but the path to achieving a soft landing remains a narrow one.’
The next update on monetary policy is 2 May.
If rates have you concerned, contact Mortgage Broker Sydney.
Our friendly brokers can meet you wherever is most convenient: your home, office or local cafe. We’re flexible.
We can also help with tips on how to uncover lower rates, boost your savings, consolidate other debts and take the pressure off increases in household prices.
Michael began his career in the finance industry over 35 years ago. He progressed through the ranks at the CBA in both retail and corporate lending, culminating in a senior position as a Corporate Relationship Executive. His decision to leave the bank in 2003 to become an independent mortgage broker was driven by his desire to assist everyday customers break through the jargon of the banking world and access the best loan products in the market. His experience is wide-ranging from helping first time buyers to large commercial enterprises. What Michael doesn’t know about home loans, simply isn’t worth knowing!