By Tanya Faulkner
Home owners can rest easy knowing they won’t be hit with another mortgage increase this month.
The Reserve Bank of Australia governor Philip Lowe has released a statement that the Board has decided to leave the cash rate target unchanged at 4.10 per cent, and the interest rate paid on Exchange Settlement balances unchanged at 4.00 per cent.
The news comes with a sigh of relief for local homeowners, who have been hit with interest rate increases by four percentage points since May last year.
Ray White Ferntree Gully sales agent Jack Rickard said, similar to last month, this is great news for home buyers looking to step into the market.
“Last month people were basically celebrating at the rates being held, after seeing so many increases in a row, so they were very happy about them not going up.
“If they leave it the same, I think a lot of buyers are viewing it as they’re going back down,” he said.
Mr Rickard said their Ferntree Gully office just celebrated their best month of the year last month, also standing as their best month since early last year, which may have been influenced by the rates being held.
“Every time the cash rate went up, people were freaking out and reassessing their borrowing capacities versus the cost of living and that sort of thing.
“I imagine that people will start to feel more confident about buying after this decision,” he said.
However, KPMG chief economist Brendan Rynne told ABC news after the announcement today, that we may still see another hike in the foreseeable future.
“For me it looks as though the RBA were trying to find a balance, knowing that the economy is already slowing, seeing the labour market is slowing, and balancing that large parts of the inflation boom have already started to come off,” he said.
These higher interest rates have been implemented to try and establish a more sustainable balance between supply and demand in the economy, which the RBA will continue to do.
It is believed that the desire for a more sustainable balance, and the uncertainty surrounding the economic outlook is what led the Board to its division to hold rates steady this month.
Money expert at Finder Richard Whitten said the decision gives some much-needed breathing room for homeowners.
“Todays’ hold is welcome news for borrowers who have been bracing themselves for another hike.
“Inflation is slowing down, which suggests that the previous rate hikes are working,” he said.
According to the RBA, inflation in Australia is declining, but is still too high at six per cent.
Whilst goods price inflation has eased, the prices of many services are continuing to rise briskly, as well as rent inflation.
The central forecast is for CPI inflation to continue to decline, to be around 3.25 per cent by the end of 2024 and to be back within the two–three per cent target range in late 2025.
The Australian economy is experiencing a period of below-trend growth and this is expected to continue for a while. Household consumption growth is weak, as is dwelling investment.
The central forecast is for GDP growth of around 1.75 per cent over 2024 and a little above two per cent over the following year.
The outlook for household consumption also remains an ongoing source of uncertainty.
Many households are experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income.
In aggregate, consumption growth has slowed substantially due to the combination of cost-of-living pressures and higher interest rates.
Returning interest rates to target within a reasonable time frame remains the priority of the RBA Board, as high inflation makes life difficult for everyone and damages the functioning of the economy.
