Good news! The Reserve Bank kept rates steady in February. However, changes in the frequency of RBA meetings this year raise questions about the duration of the rate pause. Here's what we anticipate.
It seems fitting that in a month known for Valentine’s Day, the Reserve Bank of Australia (RBA) has shown borrowers some love by keeping the cash rate steady at 4.35%.
But in reality, this recent rate pause is not motivated by romance or affection; rather, it's aimed at curbing the surge in living expenses.
After a sustained period of price hikes, inflation appears to be receding – currently standing at 4.1%, down from 7.8% in December 2022.
This aligns with the RBA's objective behind the interest rate adjustments.
In short, homeowners can breathe a sigh of relief – at least for now.
But when is the next cash rate decision due?
RBA rate calls won’t be as frequent in 2024
Australians are used to RBA rate decisions being made on a monthly basis, with a break for the holiday season each January.
That’s changing this year.
Instead of 11 meetings, the RBA will meet just eight times to decide interest rate movements, announcing their decision on the second day of:
– February 5-6
– March 18-19
– May 6-7
– June 17-18
– August 5-6
– September 23-24
– November 4-5
– December 9-10
What do less frequent meetings mean for borrowers?
So, whatever rate decision is made in March, homeowners need to live with it for almost two months until the RBA meets again in May.
As such, some pundits believe fewer meetings will naturally lead to fewer rate movements. Farewell to back-to-back rate hikes every month, for example.
However, experts also warn it might lead to bigger increases or decreases as the RBA has fewer opportunities to move the needle.
And that’s not to say individual lenders can’t, or won’t, change their home loan rates whenever they like, regardless of RBA rate decisions. For example, Mozo reports that a number of lenders lifted their variable rates in December 2023 despite the RBA keeping the cash rate steady.
Buy now or wait for rates to fall?
While the February rate pause will be welcomed by borrowers, the RBA has cautioned that further rate hikes “cannot be ruled out”, especially if inflation starts to climb again.
Even so, plenty of lenders including NAB, the Commonwealth Bank and Westpac, expect to see interest rates fall this year.
There are no guarantees – a lot can happen over the next 12 months. But it does raise questions about whether now is a good time to buy a home, or if it makes sense to hold off until rates head lower.
On one hand, a drop in interest rates could boost your borrowing power.
The catch is that lower rates could stimulate home buying activity, potentially driving home prices higher.
If this happens CoreLogic warns we could see new measures introduced to contain housing credit risk such as changes to lenders’ loan-to-value ratios.
So when might be the right time to buy?
We believe the ideal time to buy a home is when you feel ready to do so. And a good way to find out if you’re ready is to speak to us, your trusted mortgage broker in Townsville, Queensland, Brisbane, and the Gold Coast, about your borrowing power.
We, as your experienced finance broker in Australia, can help you crunch the numbers to let you know how much you could borrow, which in turn helps you figure out what kind of property you could afford to buy. If that sounds like a good plan to you, give us a call today.
To learn more, contact Premium Finance Group Australia, your reliable home loan broker in Townsville, Queensland, Australia at 1800 413 635 or email us at finance@pfga.com.au
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