Mortgage holders are hoping today’s cash rate decision will put more money in their pockets, but the big banks think we’ll have to wait a little longer yet.
After holding firm at 4.35 per cent since November last year, Aussie homeowners are eagerly awaiting the impending rate cuts at today’s RBA meeting that would see their repayments finally drop.
And fair enough. A homeowner on the average $500,000 home loan has seen their mortgage costs soar by an extra $1,200, or 52 per cent since the RBA started hiking back in 2022.
But economists have unfortunately had to burst this optimistic bubble, with many claiming the cash rate would hold tight for a few months to come yet.
AMP deputy chief economist Diana Mousina said that with job growth remaining solid, inflation moderating, and weak economic growth in Australia’s second quarter, it’s not likely rates will drop anytime soon.
“This backdrop is basically in line with the [RBA’s] forecasts for the economy and doesn’t argue the need for an imminent rate cut,” she said.
ING Bank’s Asia-Pacific regional head of research Robert Carnell agrees, telling the ABC that there is “no possibility” of the RBA easing at today’s meeting.
And if that wasn’t enough, RBA governor Michele Bullock told borrowers not to expect a cut in the “near term” at a meeting earlier this month.
“It is premature to be thinking about rate cuts,” Ms Bullock said.
“Circumstances may change, of course, and if economic conditions don’t evolve as expected, the board will respond accordingly.”
If not now, when?
But with the US Federal Reserve dishing out a cut of 0.5 per cent earlier this week (giving my $100 worth of Bitcoin a nice little boost), there’s no doubt that Aussie rate’s going to follow suit. It’s just a matter of when.
While no one can say for sure when the RBA will apply some pressure to the interest rate break pedal, Australia’s big four banks have put in their best bets.
ANZ, NAB and Westpac all expect rates to hold until at least early next year, offering predictions of February, May and March, respectively.
Only Australia’s largest bank, CBA, thought the RBA would dish out a cut before the new year at their December meeting.
At the end of the day, it will all come down to how soon the RBA can cut inflation down, with the goal being the 2 to 3 per cent range.
According to the latest data, Australia’s annual rate of inflation rose to 3.8 per cent in the June quarter, up from 3.6 per cent in the March quarter.
“Inflation in underlying terms remains too high, and the latest projections show that it will be some time yet before inflation is sustainably in the target range,” an RBA statement said after last month’s meeting.
But if and when the RBA does change the cash rate target, keep in mind that interest rates for mortgages won’t automatically change. It’ll be up to your bank to decide your interest payments, which are usually announced in a statement following the RBA’s decision.
In the meantime, all homeowners can do is keep your fingers crossed and your eyes on the news for more RBA meetings in November and December.