May 02, 2023
At its May monetary policy meeting, the Reserve Bank of Australia raised the nation’s official cash rate by 25 basis points to 3.85%.
This follows the release of the Australian Bureau of Statistics’ CPI data for the March quarter, which revealed that while inflation fell below its peak over the period, it remained above the Reserve Bank’s target.
Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “Today’s decision would have been a close call for the Reserve Bank, but the latest inflation data likely forced the Board’s hand.
“The RBA’s decision will likely be met with disappointment by the nation’s borrowers after the Bank’s April decision to pause its recent run of cash rate hikes. The rising interest rate environment has cemented demand for well-priced variable rate loan products throughout 2023, with most borrowers opting for a variable rate home loan. Mortgage Choice home loan application data shows that in April, 95% of borrowers chose variable rate home loans, compared to just 5% who fixed their rate.”
The PropTrack Home Price Index revealed that national home prices increased in April, rising 0.14%. The cumulative increase in 2023 is now 0.75%. Sydney, the market which led the downturn, is now leading the recovery. Sydney home prices are up 1.68% year to date. With the bounce, Melbourne has overtaken Sydney in terms of annual price falls.
PropTrack Senior Economist, Eleanor Creagh, said “With the cash rate now sitting at 3.85% after 375 basis points of tightening since May 2022, maximum borrowing capacities have dropped by around 30%.
“The path for home prices in the months ahead will be influenced by many opposing factors, including the level of supply hitting the market and the trajectory of interest rates. Headwinds remain, with the full impact of rate rises already delivered yet to be felt and the possibility of further tightening still in play.”
“My advice to anyone looking to refinance their home loan or buy property in the coming months would be to speak to your mortgage broker to understand your options. If you’re coming to the end of your fixed term, or you want to find a better deal on your home loan, a broker can show you the options and what your future repayments could look like,” said Mr Waldron.