Sydney home mortgage holders had another reprieve from rising repayments with the RBA’s official cash rate today remaining at 4.10%.
The RBA said that it decided to hold interest rates steady this month to provide further time to assess the impact of the increase in interest rates to-date and the economic outlook.
‘Inflation in Australia has passed its peak … but inflation is still too high and will remain so for some time yet,’ said the RBA today, in what was Governor Phillip Lowe’s final board meeting on monetary policy.
There may still be a rate increase before the end of 2023, though.
The Central Bank noted that based on the evolving assessment of data, ‘some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe.’
According to financial experts, even though interest rates are currently at or very close to their highest point, some indicators are suggesting that they will likely remain around this level until at least 2024.
While inflation appears to be gradually decreasing, which is a positive development, Gross Domestic Product (GDP) is stagnant, which is concerning.
GDP serves as the primary measure of economic wellbeing by assessing the total value of all goods and services produced in Australia. Australia’s Central Bank is projecting a modest GDP growth of approximately 1.75% for the upcoming year, a historically low figure.
The prospect of boosting GDP largely relies on a reduction in interest rates, as this injection of more funds into the economy tends to stimulate growth.
This situation places the RBA in a challenging position with conflicting pressures. Lowering interest rates can bolster GDP, but it might also intensify inflationary pressures. Conversely, maintaining higher interest rates helps control inflation but jeopardises the economy’s vulnerability to a recession.
The upcoming months will serve as a test for the Reserve Bank’s ability to effectively navigate this delicate balance under new Governor Michele Bullock, whose seven-year tenure begins on 18 September.
Meanwhile, Westpac forecast a decrease in the official cash rate to under 3.0% before the end of 2025. NAB foresees a decline to 3.10% and ANZ 4.10% in the latter part of the upcoming year. Commonwealth Bank’s prediction is for rates to be at 3.35% by November 2024.
As for the RBA, their forecast is for CPI inflation ‘to continue to decline and to be back within the 2–3 per cent target range in late 2025.’
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!