Association heads welcome latest inflation data

The December 2023 quarter CPI figures showed that there was a rise of 0.6 per cent in inflation during the quarter, down from 1.2 per cent in September 2023.

This took the annual inflation rate to 4.1 per cent, down from the 7.8 per cent peak in December 2022.

Speaking to The Adviser, the managing director of the Finance Brokers Association of Australasia (FBAA), Peter White AM, said: “This is something we’ve predicted that would underpin what happens this year with interest rates and we’ve been saying this for the last 12 months looking forward.”

The FBAA head said that the association had been expecting inflation to start “pulling back” when the cash rate peaked – with many expecting that this peak has been reached.

“We might now be in a period where interest rates will be stable for the next six months, then hopefully as we enter the second half of the year, we’ll start to see some reduction in rates,” Mr White said.

When asked what this means for the mortgage market at large, Mr White said: “Obviously, this will stimulate things in the marketplace. Depending on how much interest rates pull back, this means borrower affordability will increase and that will then probably have a flow-on effect.

“More people trying to buy houses is going to push house prices further up (but not by a lot), but it’ll probably rebalance things,” he added.

“This will have a very positive impact, meaning brokers are going to be busier than ever yet again. The refinance market will probably still keep jumping along as people take advantage of lower interest rates.”

The Mortgage and Finance Association of Australia (MFAA) chief executive Anja Pannek said that while the inflation growth figures are good news, speculation about interest rates will “continue to make home loan borrowers cautious”.

“Given the current cost-of-living crisis, relief for these borrowers is front of mind, and with mortgage repayments a household’s biggest expense, making the right choice is vital,” Ms Pannek stated.

“Hundreds of thousands of low-rate fixed-term loans are still due to expire this year and many will be looking to refinance. This is the opportunity for brokers, they are here and ready to help these borrowers understand the current lending landscape and make the right decision.”

She added that “it’s never been more important than now for borrowers to seek expert advice ... and that means – as I’ve said before – for people to reach out to their broker to understand their options.

“It’s when times are uncertain that the value of brokers really shines through,” Ms Pannek said.

Zippy Financial director and principal broker Louisa Sanghera said the sharp drop in annual inflation had proven that the Reserve Bank of Australia (RBA) was “trigger happy” on rate hikes and lamented that borrowers have had to cope with the “most rapid rate increases on record”.

Ms Sanghera stated the RBA had increased repayments “almost in a frenzy, without giving mortgage holders the benefit of allowing much time to pass between each increase”.

“The November rate rise, in particular, was completely unnecessary and I said as much at the time,” she said.

“Now, inflation has dropped so quickly that the Reserve Bank must move to an easing bias at its meeting in February with rate cuts on the agenda in coming months, too.”

She added that borrowers have had to reduce spending wherever necessary to manage higher mortgage repayments, with some “axing insurance policies” out of a lack of affordability.

“Rate reductions cannot come soon enough for many mortgage holders, with many holding on by the skin of their teeth at the moment,” she said.

Speaking to The Adviser, CEO of FinWeb, James Angus, said the reduced CPI will hopefully give the RBA some justification to reduce rates in the coming six months.

“It will hopefully give pause to a Feb rate rise that was widely anticipated,” Mr Angus said.

“In conjunction with the recently announced tax cuts, hopefully we can see consumers servicing capacities increase during 2024.”

[RELATED: Quarterly CPI growth plummets]