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RBA makes first cash rate call for 2024
In this special announcement, brought to you by Legal Home Loans, we reveal the Reserve Bank’s first cash rate decision for 2024.
Lawyers Weekly
After increasing the cash rate by 100 basis points in 2023, in its February interest rate decision – the first one for 2024 – the board of the Reserve Bank of Australia decided to hold the cash rate at 4.35 per cent.
“It has continued to ease, reflecting the resolution of earlier global supply chain disruptions and a moderation in domestic demand for goods. Services price inflation, however, declined at a more gradual pace in line with the RBA’s earlier forecasts and remains high. This is consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs,” she said.
“Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy. Accordingly, conditions in the labour market continue to ease gradually, although they remain tighter than is consistent with sustained full employment and inflation at target. Wages growth has picked up but is not expected to increase much further and remains consistent with the inflation target, on the assumption that productivity growth increases to around its long-run average. Inflation is still weighing on people’s real incomes, and household consumption growth is weak, as is dwelling investment.
“While there are encouraging signs, the economic outlook is uncertain, and the board remains highly attentive to inflation risks. The central forecasts are for inflation to return to the target range of 2–3 per cent in 2025, and to the midpoint in 2026.”
In conversation with Lawyers Weekly, Legal Home Loans founder and director Andrew Johnson said that another pause came as no surprise, given recent ABS data recently revealed that “inflation is certainly heading in the right downward direction”.
“Currently, the average interest rate range we are seeing for residential loans is approximately 6.0–6.9 per cent, depending on the product, lender and customer borrowing profile. All four major banks believe that we won’t see any further cash rate rises in 2024 and that the target has peaked at 4.35 per cent. Great news for borrowers who need some repayment relief after a long road of hikes. CBA and Westpac have both predicted the earliest cash rate drop, forecasting for September 2024,” he said.
“If you have been thinking of purchasing soon, we highly recommend obtaining your pre-approval. Getting pre-approved will give you greater certainty of your borrowing potential. When you do find the right home, you can act fast and be in a comfortable position to negotiate on price, knowing your upper spending limit.
“Lawyers should know that their advantaged position with lenders has not changed despite the rate rises. Exclusive benefits, such as waived lenders mortgage insurance when purchasing with a deposit less than 20 per cent, are still very much available.”
