Borrower relief this holiday season as RBA holds

RBA governor Michelle Bullock stated following the decision: "Higher interest rates are working to establish a more sustainable balance between aggregate supply and demand in the economy. The impact of the more recent rate rises, including last month's, will continue to flow through the economy."

"Holding the cash rate steady at this meeting will allow time to assess the impact of the increases in interest rates on demand, inflation and the labour market.

There are still significant uncertainties around the outlook. While there have been encouraging signs on goods inflation abroad, services price inflation has remained persistent and the same could occur in Australia," Ms Bullock said.

Ms Bullock further stated: "Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks."

Reacting to the decision, Mortgage Choice chief executive Anthony Waldron said Australian borrowers will be “relieved” at the call to leave the cash rate unchanged.

“Hopefully this gives households some much-needed breathing room before the expensive holiday season,” Mr Waldron said.

However, Mr Waldron noted that despite easing inflationary pressure, the RBA was transparent in its November minutes meeting that further rate rises could still potentially occur.

“By the next monetary policy meeting in February 2024, the RBA will have the December quarter Consumer Price Index (CPI) data to assess, so I’d be hesitant to breathe a sigh of relief just yet,” Mr Waldron said.

Furthermore, Mr Waldron encouraged borrowers to review their home loans to “ensure it’s still competitive” as the year draws to a close.

“If you’re planning to buy your first home or upgrade in 2024, this is a great time to set the wheels in motion for your home loan application. Your broker can help you understand your borrowing power and the home loan options available to you,” he said.

Executive director of aggregator Connective, Mark Haron, said now is the time for brokers to “demonstrate how they can be a partner to clients” as 2023 wraps up.

“This will still be a catalyst for many borrowers to review and potentially change their financial situation,” Mr Haron said.

“Many have rolled from a fixed-rate loan already into a variable and have been sitting tight, waiting to see what happens with interest rates or their fixed rate may be due to expire and they’re unsure about serviceability and fixing again. Either way, there are valuable conversations that brokers can have with clients.”

Aggregator LMG’s executive chairman Sam White said the decision to hold gives borrowers a “welcome reprieve” leading into the holiday season after the RBA lifted interest rates in November.

“It’s an early Christmas present, albeit it’s hard to know how next year will start. There [are] still lots of uncertainty,” Mr White added.

“With the RBA Board not meeting again until February, we have a window of stability that will hopefully extend into 2024, giving borrowers improved confidence in their decision making.”

Mr White further stated that annual CPI is “heading in the right direction” and that the RBA will want to observe its progress before changing the cash rate.

“Brokers can expect to have a busy first half of 2024, especially in post-settlement care,” he said.

“This year, refinancing accounted for 59 per cent of LMG brokers’ activity; before COVID-19, it was 38 per cent.

“At our Growth Summit, last week, NAB Group CEO Ross McEwan said it’ll take six to nine months for the last of the borrowers who purchased during the ultra-low cash rate environment to roll off their fixed interest rate periods.”

Moderating CPI behind hold predictions

The latest monthly CPI data for October, which revealed that inflation had dropped to 4.9 per cent from 5.6 per cent in September fuelled expectations among the mortgage broking industry that the RBA would hold the cash rate.

Speaking to The Adviser prior to the decision, director of Zippy Finance, Louisa Sanghera, said there would be “absolutely no justification” for a rate rise today (5 December) given that monthly inflation had fallen below what was forecast in October.

Home Loan Experts chief executive Alan Hemmings shared a similar sentiment, stating that another hold would give the central bank a few more months of information prior to its February meeting.

“I think having less frequent meetings means they will be faster to increase rates and slower to decrease them. Depending on what happens with Christmas spending, we could see an increase in February because inflation is still not near the 2–3 per cent band,” he said.

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