RBA February interest rate: What this means for off-the-plan buyers

Market Insights
4 months ago
2 minutes

The Reserve Bank of Australia (RBA) board met for the first time this year today to set the cash rate target. At their meeting, the board decided to leave interest rates unchanged at 4.35%.

In a statement made by Michele Bullock following today’s announcement, the RBA governor said, “Inflation continued to ease in the December quarter.

“Despite this progress, inflation remains high at 4.1%.

“Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy.”

For off-the-plan homeowners and buyers, the current cash rate of 4.35% means the average borrower with a 25-year $500,000 loan at the start of the hikes could soon be paying approximately $1,210 more monthly on their mortgage. This is a 52% increase since the beginning of the cash rate hikes in May 2022.

Today’s meeting was the first of a new schedule for the RBA, where the board will meet just eight times this year – three times less than last year and what was considered the norm. This smaller number of cash rate meetings could very well affect mortgage holders.

PRD Chief Economist Dr Diaswati Mardiasmo suggests that fewer board meetings can mean more stability. However, this doesn’t mean larger jumps in interest rates should be ruled out.

“With the cost of living fluctuating frequently, and sometimes without much warning, having fewer household budget disruptions is very beneficial,” Dr Mardiasmo said.

“Many households were stressed with the month-to-month changes.

“This way, even if the RBA takes it as an opportunity for a larger jump, it will stay that way for a longer period.”

All in all, returning inflation to target remains the RBA’s priority.

“Returning inflation to target within a reasonable timeframe remains the Board’s highest priority,” said Bullock.

“This is consistent with the RBA’s mandate for price stability and full employment.

“The Board needs to be confident that inflation is moving sustainably towards the target range.

“To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.”

“While recent data indicate that inflation is easing, it remains high,” Bullock continued.

“The Board expects that it will be some time yet before inflation is sustainably in the target range.

“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

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