RBA Rates Announcement February 2023

07.02.23 | Michael Brown | News

There was no respite for Sydneysiders today after the RBA started 2023 by lifting the cash rate again, taking it up to 3.35%%.

The Central Bank delivered a rise of 0.25% to the cash rate today as it seeks to rein in inflation following its first monetary meeting of 2023.

It means the cash rate has gone from an incredibly low 0.1% to 3.35% in just nine months.

While some in Sydney were hopeful of a pause in the hikes, the RBA was seemingly swayed by last week’s CPI figures and other economic data.

‘In Australia, CPI inflation over the year to the December quarter was 7.8 per cent, the highest since 1990.

‘In underlying terms, inflation was 6.9 per cent, which was higher than expected. Global factors explain much of this high inflation, but strong domestic demand is adding to the inflationary pressures,’ the RBA said today.

‘The Board recognises that monetary policy operates with a lag and that the full effect of the cumulative increase in interest rates is yet to be felt in mortgage payments.

‘Some households have substantial savings buffers, but others are experiencing a painful squeeze on their budgets.’

They are right about a ‘painful squeeze’. For many with a home loan in Sydney, this will be another difficult year. Cost of living remains stubbornly high and rates aren’t likely to fall, in the short term at least.

Collateral damage has been house prices. Banks and lenders are passing on the increases, and house prices around the city are falling fast. Sydney’s median house price dropped 1.4 per cent last month to $1.009 million as of December 31.

That figure could drop below the million mark by the time you read this!

Fears of recession are also being whispered about by some economic analysts. And that’s because at least $275 billion worth of fixed-rate loans with the big four banks will come to an end between July and this December. Some are calling this the ‘mortgage cliff’. Cheery.

If you set up a fixed-interest loan just before or during the height of the pandemic, your incredibly low loan rate for your apartment in Avalon or house in Hurstville could see repayments spike sharply once it expires.

Around 3.3 million Australian households (approximately 35% of the market), have a mortgage, according to government figures. And a third of them are fixed or have a fixed component.

2023 could be a very hard landing for some Sydneysiders. And we shouldn’t expect inflation to return to the 2–3 per cent band till 2025, according to the financial data boffins at Martin Place.

‘The central forecast is for CPI inflation to decline to 4¾ per cent this year and to around 3 per cent by mid-2025.’

The Central Bank meets again on March 7. Will it be consecutive rise number 10 for Sydney’s borrowers?

If rate rises 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.