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RBA makes second cash rate call for 2024
In this special announcement, brought to you by Legal Home Loans, find out if the Reserve Bank has decided to hold or increase the cash rate in its second decision of 2024.
Lawyers Weekly
After increasing the cash rate by 100 basis points in 2023, in its March interest rate decision, the board of the Reserve Bank of Australia decided to leave the cash rate unchanged at 4.25 per cent.
“The headline monthly CPI indicator was steady at 3.4 per cent over the year to January, with momentum easing over recent months, driven by moderating goods inflation. Services inflation remains elevated and is moderating at a more gradual pace. The data are 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 picked up a little further in the December quarter but appears to have peaked, with indications it will moderate over the year ahead.
“Nevertheless, this level of wages growth remains consistent with the inflation target only 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.”
In conversation with Lawyers Weekly, Legal Home Loans general manager Aylin Unsal said the RBA’s decision to hold the cash rate this month was “as expected”, especially as economic indicators are looking strong.
“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,” she said.
“All four major banks remain united in the opinion 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’s and Westpac’s economists have made the earliest prediction for a cash rate drop, forecasting for September this year, whilst others expect it to occur by December or even in 2025.”
Pre-approval remains key for lawyers looking to purchase a home this year, Unsal added.
“If you’re considering purchasing a property this year, we recommend arranging your pre-approval as soon as possible to gauge your upper limit and be in good stead when you find the right home. As the cash rate eventually drops, it’s anticipated that demand will surge, intensifying competition in an already limited supply market,” she said.
“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.”
