Good news for homeowners as RBA drops rates 0.25% at May meeting

At the May board meeting the Reserve Bank of Australia (RBA) dropped the official cash rate to 3.85%, backing up the rate cut from February this year.

Inflation continues to moderate.

In their market statement the RBA said Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.

Data on inflation for the March quarter provided further evidence that inflation continues to ease.

The RBA also said that at 2.9 per cent, annual trimmed mean inflation was below 3 per cent for the first time since 2021 and headline inflation, at 2.4 per cent, remained within the target band of 2–3 per cent.

The outlook remains uncertain.

The RBA maintain that the market outlook is uncertain.

Uncertainty in the world economy has increased over the past three months and volatility in financial markets rose sharply for a time.

While recent announcements on tariffs have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries.

Geopolitical uncertainties also remain pronounced. These developments are expected to have an adverse effect on global economic activity, particularly if households and firms delay expenditure pending greater clarity on the outlook.

This has also contributed to a weaker outlook for growth, employment and inflation in Australia. That said, world trade policy is changing rapidly, thereby making the central forecasts subject to considerable uncertainty.

Setting aside overseas developments, private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.

Maintaining low and stable inflation is the priority.

Ther RBA Board judged that the risks to inflation have become more balanced.

Inflation is in the target band and upside risks appear to have diminished as international developments are expected to weigh on the economy.

With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate.

What does this mean for you?

Firstly, if you have a home loan you should see a rate cut and that means lower repayments.

Remember, lenders are not obliged to pass on any RBA official rate cut. Now is a good time to check your mortgage, especially in the coming weeks. If you’re unsure on what is a good rate for you, check with a lending specialist who can do research for you – at no cost.

If you’re looking to buy, time will tell if a rate cut pushes up property prices. Once again, keep close to professionals, and if you think the market is moving, you may want to speed up your property research.

If you’re keen to switch and save, or just have a free home loan review, get in touch with one of our local specialists today. We can also offer free property market info to help with your research.

Understanding your options can start with a simple phone, web, or in person discussion.