RBA holds cash rate at September meeting

Aussie homeowners can breathe a sigh of relief after the Reserve Bank of Australia (RBA) held the cash rate at 4.10% at its September meeting.

Aussie homeowners can breathe a sigh of relief after the Reserve Bank held the cash rate at 4.10% at its September meeting today.

It is the third successive hold from the RBA, and the final monetary policy meeting with RBA governor Philip Lowe at the helm. Deputy governor Michele Bullock will take over as governor from September 18.

The decision came on the back of better-than-expected inflation figures released by the ABS last week, which showed the nation’s inflation rate falling from 5.4% in June to 4.9% in July.

The ABS’s quarterly Consumer Price Index also showed an easing in the rate of inflation.

“CPI inflation slowed in the June quarter, with the quarterly rise being the lowest since September 2021,” says Michelle Marquardt, ABS head of prices statistics.

Mortgage cliff ahead

But the relief may be short-lived, with more than 1.3 million fixed-rate mortgages to expire before the end of 2024.

“We are seeing 40% of homeowners struggle to pay their mortgage, with many fixed loan holders facing dramatically higher payments over the coming months,” says Graham Cooke, head of consumer research at Finder.

Rachel Wastell, money expert at Mozo, says the number of out of cycle rate rises in August put more pressure on household budgets.

“Homeowners are now scrambling to find thousands more every month to cover the jump from 2% rates just a year ago, to rates starting with 5, 6, and 7 today.”

Monthly home loan repayments have now jumped by more than $1031 a month for Australians with a home loan of $500,000, based on the average variable rate of 6.60%.

Outlook

The RBA says that while inflation has passed its peak, it is “still too high and will remain so for some time yet”, and additional measures may be required to further stifle inflation.

Cooke says the cash rate could continue to stagnate until the end of the year, while CBA senior economist Belinda Allen and economist Stephen Wu predict it could fall by the end of 2024.

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Refinancing can include a lower rate and repayments but also debt consolidation or building up a bit of a buffer in an offset account ahead of more rate hikes. There are also specific options tailored to help self-employed people who may not have financial statements completed.

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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice.