The Reserve Bank of Australia (RBA) has decided to maintain the cash rate at 4.35% in its final monetary policy meeting for 2023, marking the sixth hold this year. Governor Michelle Bullock highlighted the positive impact of higher interest rates in establishing a sustainable balance between aggregate supply and demand. She emphasized that recent rate increases, including those from the previous month, will continue influencing the economy.
The decision to keep the cash rate steady allows for a thorough assessment of the effects of interest rate hikes on demand, inflation, and the labor market. Governor Bullock acknowledged uncertainties in the economic outlook, particularly citing persistent services price inflation despite positive signs in global goods inflation.
Ms. Bullock stated, “Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks.”
Mortgage Choice CEO Anthony Waldron expressed relief among Australian borrowers, citing the unchanged cash rate providing breathing room, especially during the expensive holiday season. Despite easing inflationary pressure, Waldron cautioned about potential future rate rises, as indicated in the RBA’s November minutes.
Waldron advised borrowers to review home loans for competitiveness, especially for those planning to buy or upgrade in 2024. He encouraged initiating home loan applications and seeking guidance from brokers to understand borrowing power and available loan options.
Connective’s Executive Director, Mark Haron, urged brokers to demonstrate their value as partners, presenting an opportunity for borrowers to review and potentially change their financial situations. This is particularly relevant for those considering shifts from fixed-rate to variable loans.
LMG’s Executive Chairman, Sam White, described the decision to hold as a “welcome reprieve” for borrowers during the holiday season. He acknowledged the lingering uncertainty but highlighted the stability window until the RBA’s next meeting in February, potentially extending into 2024. White anticipated a busy first half of 2024 for brokers, emphasizing the increasing importance of post-settlement care.
The moderation in the Consumer Price Index (CPI) data for October, dropping to 4.9% from 5.6% in September, influenced expectations of a cash rate hold. Industry experts suggested that this decline provided no justification for a rate increase in December. Brokers anticipate a busier start to 2024, particularly in post-settlement care, with the annual CPI heading in a positive direction.
In summary, the RBA’s decision brings relief to borrowers, and industry experts predict increased activity in the mortgage market. Factors such as CPI moderation and ongoing economic uncertainties drive the need for borrowers to stay vigilant and consult with brokers to navigate the evolving financial landscape.
