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RBA makes March 2023 cash rate call
A perfect 10? In this special announcement — brought to you by Legal Home Loans — find out if the Reserve Bank has raised interest rates for the 10th consecutive time.
Jerome Doraisamy
In its March interest rate decision — the second for 2023 — the board of the Reserve Bank of Australia decided to increase the cash rate by 25 basis points, to 3.60 per cent.
“It will be some time before inflation is back to target rates. The outlook for the global economy remains subdued, with below average growth expected this year and next,” he said.
“The monthly CPI indicator suggests that inflation has peaked in Australia. Goods price inflation is expected to moderate over the months ahead due to both global developments and softer demand in Australia. Services price inflation remains high, with strong demand for some services over the summer. Rents are increasing at the fastest rate in some years, with vacancy rates low in many parts of the country. The central forecast is for inflation to decline this year and next, to be around 3 per cent in mid-2025. Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”
“Growth in the Australian economy has slowed, with GDP increasing by 0.5 per cent in the December quarter and 2.7 per cent over the year. Growth over the next couple of years is expected to be below trend. Household consumption growth has slowed due to the tighter financial conditions and the outlook for housing construction has softened. In contrast, the outlook for business investment remains positive, with many businesses operating at a very high level of capacity utilisation,” Dr Lowe went on.
Speaking to Lawyers Weekly, Legal Home Loans general manager Aylin Unsal said that she expects that banks will pass on today’s increase to borrowers within the week.
“The current average interest rates we are seeing for residential loans are starting from 4.88 per cent and up, depending on the product and your borrowing profile. Today’s increase will push rates above 5.0 per cent,” she explained.
“Mortgage holders locked into historically low fixed rates from 2022 and prior should be aware that there will be a significant increase in repayments when their fixed term ends, which they may want to start budgeting ahead of time for.”
Anyone concerned about rising mortgage repayments, Ms Unsal continued, should speak to their bank or broker about the best structure suited to their needs as soon as possible.
“There are $350 billion worth of fixed term home loans expiring this year, and banks have already started offering substantive discounts on interest rates as well as cashbacks to try and retain their clients.”
It is important to note, she added, that higher rates mean decreased borrowing capacity.
“Banks currently assess your affordability with a 3 per cent buffer above the offered interest rate to ensure you can keep up with repayments. This is applied to both new buyers as well as borrowers looking to refinance their existing mortgages,” she detailed.
“For example, if you bought a house in 2021 at your maximum borrowing capacity with a 2.5 per cent rate, you may not service a refinance to another lender.”
Regardless of your lending goals, Ms Unsal concluded, it is best to speak with your bank or broker for a detailed assessment to understand your options.
“A broker, such as our specialists at Legal Home Loans, can further assist you by looking at a variety of options that may be possible outside of your current lender,” she said.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
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