Rate rises finally put on hold by RBA
Finally, after almost a year of monthly increases the RBA today opted against an 11th hike in a row by holding the cash rate at 3.60%.
While this decision is a modest ray of sunshine for Australians paying off home loans as they struggle with living costs, will it be a temporary reprieve?
The RBA is adamant that inflation’s “corrosive” effects must be addressed, so there may be more rises this year, as it alluded to today.
‘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.
‘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.’
However, the Central Bank added: ‘The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.’
So, it’s possible there’ll be at least another rise in the coming months. Though, as the RBA also noted, data suggests that inflation has peaked in Australia.
Inflation is still relatively high at 6.8%, dropping from 7.8% in January, which adds to the likelihood of at least another rise this year.
Despite today’s news, there is increasing community bitterness about these monetary policies and their social effects. The perception is that it’s everyday, tax-paying Australians who have suffered the most, while simultaneously battling the daily cost of living.
Some also point to strong corporate profit results as an example of the unjust nature of these rises.
While that debate rages on, a large number of Australian households will move off fixed rate home loans in the coming months. Those who signed fixed-rate mortgages, believing the RBA’s forecasts that rates would likely remain low until 2024, will see a huge increase in monthly repayments when new, much higher rates, kick in.
A research paper released by RBA economists estimated that 880,000 mortgages will be impacted this year by the so-called “mortgage cliff”, and a further 450,000 in 2024.
That said, with a modest drop in February’s inflation rate, is the worst behind us?
‘A range of information, including the monthly CPI indicator, suggests that inflation has peaked in Australia,’ noted the RBA. ‘Goods price inflation is expected to moderate over the months ahead due to global developments and softer demand in Australia.
‘The central forecast is for inflation to decline this year and next, to around 3 per cent in mid-2025,’ the RBA said.
If you want to review your home loan arrangements, contact Mortgage Broker Group.
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