May 03, 2022
The Reserve Bank of Australia (RBA) decided at its May monetary policy meeting to raise the nation’s official cash rate by 25 basis points to 0.35%.
Speaking about the decision, Mortgage Choice National Sales Director David Zammit said, “Today’s monetary policy decision marks the first cash rate hike in over a decade. Inflationary pressures proved too strong to ignore, forcing the RBA Board to act sooner than many commentators expected. The question now is – which lenders will be the first to pass on the rise to borrowers?”
Mr Zammit continued, “Today’s decision means lenders will start to increase the pricing on their variable rate home loan products and we’ve already seen fixed rate pricing rise significantly. That said, the market remains extremely competitive and banks will be looking to attract customers through initiatives like cash-back offers, making now a great time for first time buyers and borrowers a like to shop around”.
“Cost of living pressures and the housing affordability crisis are some of the key issues facing voters in the upcoming Federal election. More than one million of Australia’s property owners have never experienced a rising interest rate environment, and with the Reserve Bank expected to raise the cash rate more than once this year it’s understandable that today’s decision will leave many feeling uncertain. Mortgage brokers will play an important role helping borrowers navigate the changes ahead.”
PropTrack economist Paul Ryan said, “By moving today, rather than waiting for further data in June, the RBA is signalling that it will intervene to curb stronger than expected inflationary pressures, despite the ongoing Federal election campaign. While the RBA seeks to remain independent from politics, failing to adjust policy may have been viewed as a greater political intervention.
“While this increase in rates was small, it likely signals the start of a series of interest rate rises before the end of 2022,” continued Mr Ryan.
“Later this week the RBA will update its forecasts for economic growth and inflation in light of this policy change and recent inflationary pressures.”
The Reserve Bank’s decision to raise the cash rate will likely put further downward pressure on a slowly housing market. The PropTrack Home Price Index Report – March 2022 showed that price growth stalled across the country, with the slowest monthly growth since the onset of the pandemic.
Mr Zammit said, “Borrowers should remember that it follows more than a decade of record-low rates. My advice to borrowers would be to speak to your mortgage broker about how the Reserve Bank’s decision will affect you. Borrowers who haven’t had their home loan reviewed in the past year should take this opportunity to ensure you’re still getting a competitive deal.”