February 07, 2023
At its February monetary policy meeting, the Reserve Bank of Australia raised the nation’s official cash rate by 25 basis points to 3.35%.
Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Persistently high inflation has forced the Reserve Bank to deliver the ninth consecutive cash rate increase.
“Many borrowers are yet to feel the full impact of rate rises as they wait to roll off lower fixed interest rates over the next few months. Many of these borrowers will need to adjust their budgets in 2023 to account for significant increases in their mortgage repayments.”
Mortgage Choice home loan application data shows that despite rising interest rates the vast majority of borrowers are prepared to ride out the wave. Demand for variable rate home loan products remains steady, with 94% of borrowers choosing this type of product over fixed rates in January.
PropTrack Director Economic Research Cameron Kusher said, “Despite signs of a marginal easing in inflationary pressures the highest rate of inflation in decades seemingly afforded the RBA little choice but to raise interest rates.”
Rising home loan interest rates and a reduction in borrowing power continue to weigh on the property market. The PropTrack Home Price Index shows national home prices fell for the 10th month in a row in January (-0.09%), with the substantial 300 bp of cash rate tightening seen in 2022 weighing on home prices in most parts of the country. However, the worst of the downturn appears to have passed.
Mr Waldron said, “The market is divided on where the cash rate will land this year, with some predictions suggesting the RBA will stop raising the cash rate later this year and others suggesting more pain is on the way. While this uncertainty is challenging, borrowers can take control by proactively managing their home loans. If you haven’t asked your mortgage broker to review your mortgage in the past 12 months, now is a great time to chat to an expert and start your year off on the right foot.”
