RBA keeps rates on hold again as hike prospects edge higher

The RBA confirmed the cash rate of 4.35% is set to stay until at least the end of September following its first meeting for the new financial year.

It’s positive news for Aussie households who have just been hit hard by the end of the fuel excise discount while cost-of-living pressures continue to compound.

The Reserve Bank has kept the cash rate on hold for the second time in a row. Picture: Getty

Borrowers can expect refinancing opportunities to increase off the back of the decision, with home loan lender competition already starting to heat up as lower fixed and variable mortgage offers expand.

The latest decision from the RBA was expected among economists and in market forecasts, coming in large part to cooler-than-expected inflation in June as well as steady employment figures.

“This gives the RBA a bit of comfort that inflation has not picked up as much as they were fearing,” REA Group executive manager of economics Angus Moore said.

Despite this, Mr Moore warned inflation is still too high.

REA Group executive manager of economics Angus Moore said inflation data will have left the RBA feeling confident. Picture: Supplied

"The RBA is focused on getting underlying inflation back inside its target band," he said. "That means there’s still a chance we could see another rate hike later this year.”

Inflation holding steady

The most comprehensive measure of inflation, the trimmed mean, remained unchanged in June in a surprise finding.

At 3.6% in the 12 months to June, it is noticeably cooler than both the bank and Treasury had forecast earlier in the year.

“Whether we see another hike will really depend on where inflation goes from here and whether the better-than-expected outcomes persist,” Mr Moore said.

Headline inflation was also cooler than expected in the Australian Bureau of Statistics’ June data; the Consumer Price Index (CPI) rose 3.8% in the year to June, down from 4% in May.

Source: ABS

At the moment, CPI is sitting one percentage point under the anticipated June peak, spelling good news for the future path for interest rates.

Mortgage Choice chief executive Anthony Waldron said the rate pause "makes sense" but also issued a note of warning to borrowers.

“Inflation remains sticky enough that the possibility of another cash rate rise this year can’t be ruled out.”

Rate cut watch

While rate hikes might not be over just yet, Australia’s largest lenders are all united in the view that borrowers will get rate cuts at some point in the next 12 months.

Australia's largest home loan lenders all say rate cuts will come in 2027. Picture: Supplied

Commonwealth Bank, ANZ, Westpac and National Australia Bank say Aussies will be in line for relief next year, thanks to the RBA’s softened inflation outlook.

New forecasts, to be published following Tuesday’s cash rate decision, should further inform lender expectations as the second half of the year unfolds.

Expectations for rate cuts in 2027 remain largely contingent on the end of the Iran War, which has continued into July and August despite initially successful peace negotiations between Iran and the United States in June.

Until then, borrowers won’t see relief from the RBA when it comes to minimum mortgage repayments but have other ways to get ahead.

Mortgage Choice chief executive Anthony Waldron confirms borrowers are moving into a refinancing phase. Picture: Supplied

“This hold shouldn’t mean standing still, especially when it comes to your home loan,” Mr Waldron said. “It’s a good opportunity for borrowers to reassess.”

Borrowers are already taking advantage of improved forecasts, he added, with refinancing accounting for around one in three Mortgage Choice home loan submissions last month.

Property market woes

With the spring selling season around the corner, a pause from the RBA is likely to boost buyer confidence and inject some life back into the nation’s torpid property market.

Home prices fell for the fourth straight month in July on the back of consumers' lack of confidence, continued high interest rates and investor concern around the property tax changes announced in the May budget. 

"Home prices and housing market conditions are expected to remain soft over the back half of this year, as the effect of the three hikes earlier in the year, and the tax changes in the budget, continue to flow through,” Mr Moore said. “We’re likely to see a turning point late this year or early next."

The median price of a home in Australia is sitting at $894,000, down from $908,000 back in March, PropTrack data shows.

Losses have been concentrated largely in pricey markets like Sydney, Perth and Adelaide, while the nation’s most affordable capital, Darwin, was the only place where values rose last month.

“This is creating opportunities for hopeful buyers who are ready to act,” Mr Waldron said. “Those looking to buy their first or next home should get their ducks in a row.”

'What is more important: low rate or home loan features': youtube.com/mortgagechoice

Lenders on the move

Borrowers are well positioned to take advantage of competition-hungry lenders as spring approaches.

More are offering variable rates below 6% as more cash rate stability arrives, including Westpac, ING, and Bendigo Bank.

“Speaking to a broker can help you understand what your borrowing power is and to understand how future rate rises could impact your repayments,” Mr Waldron added.

The RBA’s monetary policy board will make the next cash rate decision on 29 September.