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RBA makes April 2023 cash rate call
Has the RBA decided to pause rate rises? In this special announcement — brought to you by Legal Home Loans — find out if the Reserve Bank has raised interest rates for the 11th consecutive time or if, as speculation suggested, it has opted to halt increases.
Jerome Doraisamy
In its April interest rate decision — the third for 2023 — the board of the Reserve Bank of Australia decided to hold the case rate at 3.60 per cent.
In a statement, RBA governor Philip Lowe said that the decision follows a cumulative increase in interest rates of 3.5 percentage points since May last year.
“The board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt. The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook,” he said.
“Global inflation remains very high. In headline terms, it is moderating, although services price inflation remains high in many economies. The outlook for the global economy remains subdued, with below-average growth expected this year and next. The recent banking system problems in the United States and Switzerland have resulted in volatility in financial markets and a reassessment of the outlook for global interest rates. These problems are also expected to lead to tighter financial conditions, which would be an additional headwind for the global economy.”
“The Australian banking system is strong, well capitalised and highly liquid. It is well placed to provide the credit that the economy needs,” Dr Lowe continued.
“A range of information, including the monthly CPI indicator, suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to global developments and softer demand in Australia. Meanwhile, rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country. The prices of utilities are also rising quickly. The central forecast is for inflation to decline this year and next, to around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”
In conversation with Lawyers Weekly, Legal Home Loans general manager Aylin Unsal said that no increase this month is “great news” for borrowers.
“Currently, the average interest rate range for residential loans we are seeing is approximately between 4.89 per cent and up, depending on the product and your borrowing profile, she said.
“The cash rate pause means that home loan interest rates will likely hold for now and offer some stability to borrowers for the first time in a year. However, of course, we can’t know what will happen next month.”
There are $350 billion worth of fixed-term home loans expiring this year, Ms Unsal continued, and banks have already started offering substantive discounts and cashbacks in an effort to attract and retain customers.
“If you are one of these borrowers, we recommend speaking to your bank or broker about your options one to two months prior to your fixed term expiry,” she advised.
“For those seeking new loans, it is important to note that borrowing capacity has decreased as a result of the cash rate rises to date. Banks currently assess your affordability with a 3 per cent buffer above the offered interest rate to ensure you can keep up with repayments.”
“If you are thinking of purchasing soon, it is now more important than ever to gauge borrowing power as well as obtain pre-approval to confirm a purchasing budget.”
Despite all the recent changes in the market, Ms Unsal concluded, lawyers should know that their advantaged position with lenders remains.
“Exclusive benefits, such as waived lenders mortgage insurance when buying with a deposit less than 20 per cent, are very much still available,” she noted.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly. A former lawyer, he has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. He is also the host of all five shows under The Lawyers Weekly Podcast Network, and has overseen the brand's audio medium growth from 4,000 downloads per month to over 60,000 downloads per month, making The Lawyers Weekly Show the most popular industry-specific podcast in Australia. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of Minds Count.
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