RBA keeps the official cash rate on hold in May

The Reserve Bank Board decided to leave the cash rate on hold at 4.35 per cent at its May monetary policy meeting.
RBA keeps the official cash rate on hold in May

May 07, 2024

Mortgage Choice CEO Anthony Waldron on the Reserve Bank decision:

“The Reserve Bank’s decision to keep the cash rate on hold at 4.35% follows the release of the March quarter CPI Index by the Australian Bureau of Statistics, which showed that while inflation came in higher than expected, it has been trending down since December 2022.   

“The decision to keep the cash rate on hold will be welcomed by borrowers who are hoping for cost-of-living relief when the Federal Budget is handed down on 14 May. 

“While the latest inflation data may have dashed borrowers hopes of a cash rate cut in the near future, I suspect the RBA will wait to see the Federal Budget and June quarter CPI before considering any changes to the cash rate. 

“Mortgage Choice home loan submission data reveals that borrowers’ preference for variable rate home loans has remained virtually unchanged since September last year. In April 2024, 97% of submissions were for a variable rate home loan.  

“Mortgage Choice submission data shows that cost-conscious borrowers are seeking better deals on their home loans, with a 2% increase in the proportion of borrowers opting to refinance in April 2024. 

“I’d encourage borrowers looking to save on their home loan repayments to meet with their mortgage broker to explore their options. There are lenders on our panel offering interest rates close to 6.00% p.a., and borrowers could save thousands in interest per year by making the switch.  

“With rates looking likely to stay on hold for the coming months, those in a position to buy their first or next home should consider meeting with their broker to understand their borrowing power.” 

For further information on the housing market, please refer to comments by PropTrack economist Eleanor Creagh below:

“Today the Reserve Bank held the cash rate steady at 4.35%. This sustained pause reflects the expected easing in inflation still to come as the economy, businesses, and consumers continue to adjust to the full impact of significant interest rate tightening delivered since May 2022.
“Although inflation has not fallen as quickly as expected early in the year, retail sales and consumption are weak, and consumer sentiment remains low. Despite higher-than-expected inflation in the March quarter confirming the challenging journey towards lower inflation, the Board remain forward looking, anticipating further decline in inflation by the end of the year.
“Home prices have continued to climb despite the higher interest rate environment, the PropTrack Home Price Index showed national home prices hit a fresh record in April, though the pace of monthly growth has slowed since March in every capital city, except Darwin.
“Home prices rose quickly in early 2024, with affordability constraints overpowered by an imbalance between supply and demand. However, it is reasonable to expect a slowing from here as we move into a seasonally quieter period for property markets, especially with interest rate cut expectations pushed back.
“Property prices are expected to lift further this year, with housing demand buoyed by population growth, tight rental markets, resilient labour market conditions and home equity gains supporting upgrade activity. Further, falling inflation and tax cuts on July 1 will support real incomes and household spending over the second half of this year.
“Meanwhile, the supply side of the housing market has fallen short in responding to substantial demand. Building activity is at decade-low levels, exacerbating the housing supply shortage.
“This imbalance between supply and demand has offset the higher interest rate environment and deterioration in affordability and is expected to continue to do so, fuelling further price rises.
“Although higher than expected inflation in the March quarter has pushed back the expected timing of rate cuts, most still expect that the next move for interest rates will be down. However, the timing remains uncertain.
“As a result, prices are expected to lift further in the months ahead, though it’s likely the pace of growth will continue slowing as the seasonally quieter winter period approaches, particularly in tandem with rate cut expectations being pushed further out.”

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