The RBA has kept the official cash rate steady in Michele Bullock’s first board meeting on monetary policy as Central Bank Governor.
In another welcome move for Sydney’s home mortgage holders, the RBA opted for a fourth consecutive month of rates at 4.10%.
Despite a lift in the latest monthly inflation figures taking the annual rate from 4.9% to 5.2%, the Central Bank feels rates don’t require another hike just yet.
‘Inflation in Australia has passed its peak but is still too high and will remain so for some time yet,” said the RBA today.
‘Inflation is coming down, the labour market remains strong and the economy is operating at a high level of capacity utilisation, although growth has slowed.
‘The central forecast is for CPI inflation to continue to decline and to be back within the 2–3 per cent target range in late 2025.’
Underlining the challenge in predicting rate movements, respected economist Chris Richardson said that the forthcoming tax cuts are worth three interest rate cuts and, as such, rates might not fall as quickly as in other countries.
They may not even fall much – if at all – in 2024, he noted.
However, market watchers anticipate that the RBA will wait for quarterly inflation data and jobs figures before considering any interest rate hike, delaying any potential rate adjustment until at least next month.
At the same time, the so-called ‘mortgage cliff’ has passed its halfway point, with about a million Australians now paying a more expensive variable interest rate on their mortgages.
Another million or so loans are expected to transition to higher interest rates in the second half of this year and into 2024.
Australian households are undoubtedly doing it tough as record amounts of income are being spent on mortgages. Though Aussies are also proving financially resilient.
This was underlined by outgoing RBA Governor Philip Lowe, who recently pointed to savings made by many Australians (largely during the COVID era) that helped buffett them from these sharp increases in repayments.
That said, it’s interesting to note that AMP anticipates rate reductions as early as Q1 2024.
The RBA added its customary warning today, saying, ‘some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.’
If you are considering reviewing your current arrangements, reach out to Mortgage Broker Sydney. Our friendly brokers can meet you wherever is most convenient: your home, office or local cafe.
In addition, we are here to provide guidance on various strategies such as uncovering lower rates, enhancing savings, consolidating debts, and alleviating the impact of rising 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!