August 01, 2023
At its August monetary policy meeting, the Reserve Bank of Australia left the nation’s official cash rate unchanged at 4.10%.
Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Borrowers will be pleased to see that the Reserve Bank has held the cash rate steady for the second month running; however, a stable cash rate in July didn’t stop the nation’s lenders from lifting rates on some fixed- and variable-rate home loan products.”
Mortgage Choice loan submission data shows that variable rate home loans remain more popular than fixed rate products, likely due to recent rises in fixed rate home loan pricing. The data shows that over July, only 9% of home loans had a fixed component. The same data shows that borrowers are seeking better deals on their home loans, with the proportion of borrowers looking to refinance climbing to 52% during July.
Data from the Australian Bureau of Statistics (ABS) shows that the recent spate of cash rate rises is beginning to have a meaningful effect on inflation and on consumer spending. The data showed that the value of retail trade nationally was down 0.8% month on month, following a 0.1 per cent fall in April 2023.
Over the June 2023 quarter, the Consumer Price Index (CPI) rose 0.8%, the smallest quarterly increase since September 2021. Headline CPI slowed from 7% year on year over the previous quarter to 6% over the June 2023 quarter, the slowest annual growth since March 2022.
PropTrack Senior Economist Eleanor Creagh said, “Subsiding momentum in inflation and consumer spending has eased the pressure on the RBA to continue lifting interest rates, allowing more time to assess the economic outlook as it tries to engineer a soft landing while returning inflation to target. Though still high relative to history, and well above the RBA’s 2-3% target range, CPI inflation was below both market expectations and the RBA’s official forecasts and looks set to continue to moderate and move lower into the first half of 2024.”
The July 2023 PropTrack Home Price Index shows that national home prices are now higher than they were a year ago, after jumping a further 0.16% in July. National home prices have reversed the majority of the decline recorded in 2022, climbing 2.79% from their low in December.
Mr Waldron said, “It’s not yet clear if the Reserve Bank will keep the cash rate on hold for an extended period, but with rates already having increased so rapidly since May last year, borrowers with fixed rates ending soon and those looking for a better deal should speak to a mortgage broker to understand their options.”
