RBA delivers welcome pause on rate increases

At its April monetary policy meeting, the Reserve Bank of Australia left the nation’s official cash rate unchanged at 3.60%.
RBA delivers welcome pause on rate increases

April 04, 2023

At its April monetary policy meeting, the Reserve Bank of Australia left the nation’s official cash rate unchanged at 3.60%.     

Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Today’s decision will be met with a collective sigh of relief from the nation’s borrowers and those looking to buy. The question now will be if today signals an extended pause to cash rate rises?”  

After 10 consecutive rate rises, the decision to keep the cash rate on hold follows highly anticipated data releases from the Australian Bureau of Statistics (ABS), which revealed the ongoing strength in the labour market, flat retail sales growth and the second consecutive month of lower annual inflation in March. 

In this rising interest rate environment, borrowers have continued to opt for variable rate home loans. Mortgage Choice home loan application data shows that in 2023 to date, 94% of borrowers chose variable rate home loan products compared to just 6% who elected to fix their rate.  

PropTrack Senior Economist, Eleanor Creagh, said “With the Reserve Bank operating under the ‘policy of least regret’ and given that the full effect of higher interest rates is yet to be felt, the risk that the economy will slow more than expected was weighed against the risk of persistent inflation pressures, with the RBA deciding to pause their tightening to allow more time to better assess how economic conditions unfold. 

“After 350 basis points of tightening since May 2022, maximum borrowing capacities have dropped by close to 30%. The impact of interest rate rises is being counterbalanced by the strong rebound in immigration and tight rental markets, which combined with the limited stock on market is underpinning home prices.” 

The PropTrack Home Price Index revealed that national home prices have reversed their downward trend, with price falls easing. National home prices were largely stable in March, rising slightly by 0.13%. The cumulative increase in 2023 is now 0.49% and trending upwards. While interest rates have been the primary driver of price falls to date, the recent upturn has been influenced by the limited supply of properties for sale. 

“Time will tell if today’s decision to hold the cash rate marks the beginning of an extended pause in interest rate rises,” said Mr Waldron. “I urge all borrowers and buyers to speak to their mortgage broker before applying for their home loan to understand how recent changes in the rate environment have affected their situation.” 

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