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RBA makes May 2024 cash rate call
After holding the cash rate in 2024 so far, will the Reserve Bank hold or increase the cash rate in its May interest rate decision? Find out in this special announcement, brought to you by Legal Home Loans.
Lawyers Weekly
After holding the cash rate at 4.35 per cent in its February and March decisions, the Reserve Bank of Australia has decided to continue to hold the cash rate.
“The CPI grew by 3.6 per cent over the year to the March quarter, down from 4.1 per cent over the year to December. Underlying inflation was higher than headline inflation and declined by less. This was due in large part to services inflation, which remains high and is moderating only gradually.
“Higher interest rates have been working to bring aggregate demand and supply somewhat closer towards balance. But the data indicate continuing excess demand in the economy, coupled with strong domestic cost pressures, both for labour and non-labour inputs. Conditions in the labour market have eased over the past year but remain tighter than is consistent with sustained full employment and inflation at target. Wages growth appears to have peaked but is still above the level that can be sustained given trend productivity growth. Meanwhile, inflation is still weighing on people’s real incomes, and output growth has been subdued, reflecting weak household consumption growth,” she said.
“The economic outlook remains uncertain, and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth. The central forecasts, based on the assumption that the cash rate follows market expectations, are for inflation to return to the target range of 2–3 per cent in the second half of 2025 and to the midpoint in 2026. In the near term, inflation is forecast to be higher because of the recent rise in domestic petrol prices, and higher-than-expected services price inflation, which is now forecast to decline more slowly over the rest of the year. Inflation is, however, expected to decline over 2025 and 2026.”
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 “unsurprising” and that further trends in inflation data will likely be considered before a cash rate cut.
“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.
“We’re seeing increased levels of stock come on to the market, which is good news for those looking to purchase. With more supply meeting demand, this may help stem the upward pressure on house prices.”
For those considering purchasing soon, Unsal emphasised the importance of 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,” 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.”
