No respite for borrowers as Reserve Bank leaves cash rate unchanged
The wait for interest rate relief for long-suffering mortgage holders continues after the board of the Reserve Bank of Australia decided today to leave the official cash rate on hold at 4.35% once again.
It’s the seventh consecutive meeting in which the RBA board has not moved on rates. The last time the central bank changed the OCR was in November 2023, when it was lifted 25 basis points to 4.35%.
The Reserve Bank’s decision to hold the course on interest rates was widely predicted by economists and finance experts, with all 42 of the pundits Finder surveyed for its RBA cash rate survey saying the cash rate would not change at Tuesday’s board meeting.
Borrowers will have to wait longer for the Reserve Bank to lower interest rates despite the fact that monthly inflation eased to 3.5% in July, down from 3.8% in June.
In its decision on Tuesday, the RBA board said inflation had fallen substantially since the peak in 2022, as higher interest rates had been working to bring aggregate demand and supply closer towards balance.
“But inflation is still some way above the midpoint of the 2% to 3% target range,” the RBA board stated.
“In underlying terms, as represented by the trimmed mean, inflation was 3.9% over the year to the June quarter, broadly as forecast in the May Statement on Monetary Policy (SMP).
“Headline inflation declined in July, as measured by the monthly CPI indicator. Headline inflation is expected to fall further temporarily, as a result of federal and state cost of living relief.”
The RBA said its current forecasts do not see inflation returning sustainably to target until 2026.
Mortgage industry reaction
So how did leaders in the mortgage industry react to the Reserve Bank’s decision to leave the cash rate unchanged?
Bluestone Home Loans
Tony MacRae (pictured above left), chief commercial officer at non-bank lender Bluestone Home Loans, said he was not surprised by the RBA’s decision.
“Whilst a rate cut would have been a small pleasing relief for borrowers, it would seem the sensible thing to ensure that inflation is kept well under control before any downward moves are implemented,” MacRae said.
Controlling inflation is a key function of the RBA, so in that respect this seems like a sensible decision, he said.
“The RBA are proceeding cautiously at present as a return to inflationary growth presents a great threat to the overall economy.:”
MacRae said the hold decision retained certainty. “Whilst acknowledging continued cost of living pressures we are currently not seeing any real uplift in arrears.”
“The RBA is taking a cautious approach to ensuring inflationary pressure is kept at bay and it seems to be working. Therefore, I would expect the next move will be down but probably not until the new year.”
Lendi Group
David Hyman (pictured above centre), the co-founder and CEO of broker network Lendi Group, which includes Aussie Home Loans, said in the in the face of unchanging interest rates, “Aussie reminds homeowners that doing nothing is often the worst financial decision they can make”.
“Our most recent consumer sentiment tells us that nearly four in 10 (37%) of homeowners are waiting on rates to drop before they do anything,” Hyman said.
“With only one bank forecasting a rate cut in 2024, it has never been more important to chat to a broker”
Connective
Mark Haron (pictured above right), executive director at aggregator Connective, said it was good news that the RBA has decided to maintain the cash rate – but it did not mean the pressure was off for borrowers.
“A challenging housing market, inflation and rising cost of living continue to affect households,” Haron said.
Brokers have demonstrated resilience and expertise in helping borrowers navigate one of the toughest economic conditions, he said.
“As we enter the busiest selling season this spring, their role is even more important as homebuyers look to access finance and borrowers seek to secure better terms.”
Connective’s advice to brokers was to continue reaching out to their clients.
“Ask them what their long-term goals are, and educate them about their financing options that are aligned with these goals,” said Haron. “Emphasise responsible lending practices and never lose sight of acting in the best interests of clients.”
