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Brokers anticipate a cash rate hold

by Adrian Suljanovic12 minute read

The central bank is expected to hold the official cash rate steady during its February board meeting, brokers have said.

With the first cash rate decision of 2024 due to be announced by the Reserve Bank of Australia (RBA), mortgage brokers are predicting to see no change in the official cash rate, leaving it at 4.35 per cent.

Speaking to The Adviser, Loan Market Geelong operations manager Rebecca Baddeley said she hopes to see the RBA hold the cash rate as further increases could place further stress on clients.

“It’s going to be very difficult for them if their repayments increase any further than what the current rates are,” Ms Baddeley said.


“We’re already finding that a lot of people are struggling with their repayments and are unsure how to budget accordingly, or they’re not able to move lenders due to borrowing capacity issues.”

Vincent Woodgate, managing director of Woodgate Finance, said the RBA will leave interest rates unchanged, adding that the RBA has “overdone” the interest rate hikes and that the June and November hikes were unnecessary.

“The [inflation] numbers have come back down to 4.1 per cent, and they’ll be back into the low 3 per cent range by midyear. I reckon by early June/July, the RBA will begin to reduce rates,” Mr Woodgate said.

Mr Woodgate further stated that a hold in the cash rate will provide borrowers with more confidence going forward.

Finsure Group chief executive Simon Bednar told The Adviser that he believes that the RBA will keep official interest rates on hold, citing the recent lower-than-expected inflation figures released by the Australian Bureau of Statistics (ABS) last week (31 January).

“Consumer prices rose just 0.6 per cent over the December quarter, the slowest pace since March 2021, and 4.1 per cent over the past year,” Mr Bednar said.

“There is still a way to go before we hit the RBA’s target range of 2–3 per cent, but 4.1 per cent over the past year is a good sign.

“I also think there are still external pressures in the economy which could create further inflationary pressures.

“This includes state-sponsored infrastructure, housing, energy and tax breaks, but I definitely think we are on the right path.”

Home Loan Experts CEO Alan Hemmings shared a similar sentiment to Mr Bednar, stating that the easing of inflation “lowers the pressure to increase rates” and that “we have seen most bank economists predict we are at the top of the cycle and the next move will probably be a cut”.

“I think the Reserve Bank will pause increases and give itself time to see what inflation looks like in the first quarter of this year, meaning the conversation will turn to what rates will do in May or June,” Mr Hemmings said.

Mr Hemmings added that he is unsure of the expectation that the RBA will reduce rates by the end of the year.

“Although inflation continues to fall, it is still above the 2–3 per cent band the RBA likes. We also still have inflationary pressures, including migration and the proposed tax cuts in July that will put more money in people’s pockets,” he said.

“Adding to this, the RBA will be nervous about cutting rates too quickly and heating up the property market. Although cost of living is having an impact on everyone, we still saw an increase in property prices during 2023.”

New year, new RBA

The February meeting also marked the beginning of the RBA’s change in process that was first announced in July 2023.

As a result of a review entitled An RBA Fit for the Future, the RBA has reduced the number of monetary policy board meetings down to eight from 11 per year and is set to hold a media conference following the decision with the statement of monetary policy to be delivered by the board itself and not RBA governor Michele Bullock.

At the time of writing, the board meeting has already commenced on Monday (5 February) afternoon, which will continue on Tuesday (6 February) morning.

The outcome of the meeting is still scheduled to be announced at 2:30 pm on the second day.

[RELATED: Association heads welcome latest inflation data]

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