RBA leaves March interest rates unchanged: What this means for off-the-plan property buyers

The Reserve Bank of Australia (RBA) has decided to leave interest rates unchanged at 4.35% following the board’s March meeting today.

Today’s mid-month announcement may come as a surprise to many Australians, what with the board announcing a new schedule of meetings every six weeks instead of the first Tuesday of the month. The board will then meet just eight times this year – three times less than last year and what was previously considered the norm. This smaller number of cash rate meetings could very well affect mortgage holders.

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.

In a statement released following today’s announcement, the RBA board revealed that inflation is continuing to moderate, yet remains high.

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

“The headline monthly CPI indicator was steady at 3.4% over the year to January, with momentum easing over recent months, driven by moderating goods inflation.”

Australia’s big four banks correctly predicted the RBA’s decision to hold interest rates this month.

Commonwealth Bank (CBA) noted that “The RBA’s highly aggressive rate hiking cycle has clearly worked to slow demand growth in the economy.

“Rising mortgage payments along with a lift in tax payable and the effects of elevated inflation have weighed on household purchasing power.”

According to NAB economists, interest rates have peaked at 4.35%, but are unlikely to decrease soon. “Although the timing of rate cuts remains uncertain, lower interest rates should see a more substantial lift in sentiment, but also deliver a boost to borrowing capacity and lower the serviceability assessment hurdle,” they said.

“How sensitive the market is to rate cuts remains a key unknown.

“We would need to see a bit more than seven cash rate cuts of 25 basis points each before interest rates returned to the pre-COVID decade average of 2.6%.”

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,” the board remarked in their statement.

“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,” they 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 remains uncertain and the Board is not ruling anything in or out.

“The Board will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

“The Board remains resolute in its determination to return inflation to target.”

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