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RBA makes Melbourne Cup Day cash rate call
The rate that stops the nation: in this special announcement, brought to you by Legal Home Loans, we reveal whether the Reserve Bank has decided to raise the cash rate, following speculation that it would do so this month.
Lawyers Weekly
In its 10th and penultimate cash rate call for 2023, and after four straight months of holding, the board of the Reserve Bank of Australia today (7 November) decided to increase the cash rate by 25 basis points to 4.35 per cent.
“The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly. While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected. CPI inflation is now expected to be around 3½ per cent by the end of 2024 and at the top of the target range of 2 to 3 per cent by the end of 2025. The board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable time frame,” she said.
“The board had held interest rates steady since June following an increase of 4 percentage points since May last year. It had judged that higher interest rates were working to establish a more sustainable balance between supply and demand in the economy. Furthermore, it had noted that the impact of the more recent rate rises would continue to flow through the economy. It had therefore decided that it was appropriate to hold rates steady to provide time to assess the impact of the increase in interest rates so far. In particular, the board had indicated that it would be paying close attention to developments in the global economy, trends in household spending, and the outlook for inflation and the labour market.”
Since its August meeting, governor Bullock continued, the board has received updated information on inflation, the labour market, economic activity and the revised set of forecasts.
“The weight of this information suggests that the risk of inflation remaining higher for longer has increased,” she said.
“While the economy is experiencing a period of below-trend growth, it has been stronger than expected over the first half of the year. Underlying inflation was higher than expected at the time of the August forecasts, including across a broad range of services. Conditions in the labour market have eased, but they remain tight. Housing prices are continuing to rise across the country.”
Speaking following the decision, Legal Home Loans (LHL) general manager Aylin Unsal said that the broking firm expects banks will pass on today’s increase to borrowers within the week.
“The current average interest rate range for residential loans we are seeing today is approximately between 5.8–6.85 per cent, depending on the product and your borrowing profile. We expect this to go up by 0.25 per cent.”
Even in the face of rising rates, Ms Unsal went on, market activity has ramped up this spring season, with buyer and seller confidence notably coming back into the market.
“Auction clearance rates are higher in Sydney, Melbourne, Brisbane, and Adelaide compared to this time last year.”
“If you’re thinking of purchasing soon, we recommend obtaining home loan pre-approval as a first step. This will give you more certainty on your borrowing power and ensures you won’t overspend at auction,” she advised.
“Online calculators are not comprehensive – it is best to have your financial situation properly assessed by a broker or your lender so you know your price range whilst shopping. It is also important to note that your borrowing capacity may differ from lender to lender, depending on their assessment criteria and interest rates; a broker can help you identify the best loan product suited to your needs in the market.”
If you’re someone who is feeling concerned about rising mortgage repayments and the impact on your household budget, Ms Unsal concluded, LHL recommends speaking to your bank or broker to explore the best structure suited to your needs.
“Doing so will not impact your credit history, and it is better to reach out early before falling into arrears,” she stressed.
“While the future can feel unknown, lawyers should know that their advantaged position with lenders has not changed. Exclusive benefits, such as waived lenders mortgage insurance when buying with a deposit less than 20 per cent, are very much available.”
