RBA delivers more moderate 25 bp rise

October 04, 2022

At its October monetary policy meeting, the Reserve Bank of Australia (RBA) raised the nation’s official cash rate by 25 basis points to 2.60%.  

Speaking about the decision, Mortgage Choice CEO Anthony Waldron said, “The Board’s decision to raise the cash rate once again will not come as welcome news to borrowers who have seen the cash rate rise six times in as many months, but an increase of 25 basis points will be a smaller hit for those already with mortgages and others hoping to enter the property market in the coming months. This may be a sign that the RBA has started to slow the pace of this tightening cycle.

“This year has seen a serious period of adjustment for many Australians. Our brokers’ customers are already taking action on increased repayments, with many seeking better deals on their home loans and adjusting their household budgets. The challenge is that this belt tightening is yet to be reflected in the economic data, which is why the RBA is still trying to course correct and combat inflation via rate increases.”

“Those with fixed rates are yet to feel the impact of the RBA’s decisions. I encourage these borrowers to speak to their broker early and start planning for the end of their fixed term. There are an abundance of attractive offers from lenders vying for new customers, which puts borrowers looking to refinance in a strong position to secure a better deal.”

Australian Bureau of Statistics (ABS) data for August shows a strong domestic economy, with a tight labour market and an unemployment rate of 3.5%. Retail sales data for August revealed an eighth consecutive rise as households continue to spend. Inflation data, which is now being published monthly by the ABS, shows that inflation remains high. The monthly Consumer Price Index indicator rose 7% in the year to July and 6.8% to August.

Mortgage Choice data also reveals that variable rate loans remain the most popular choice for borrowers, with 96% of borrowers opting for this type of product during September.

PropTrack data shows that national dwelling values are down 3.2% since April; however, the typically busy Spring selling season saw the pace of falls slow in September, with national dwelling values falling 0.19% over the month.

PropTrack economist Eleanor Creagh said, “As borrowing capacities are constrained and buyers’ budgets shrink, the most expensive markets of Sydney and Melbourne are leading the price declines, and in Sydney prices are down more than 5% from their peak and below the levels recorded in September last year.

“Today’s rate hike will further increase borrowing costs and reduce maximum borrowing capacities, pushing property prices further down. In the period ahead, the level of interest rates will be a key determinant of housing market conditions and the pace and depth of home price falls,” said Ms Creagh.

Mr Waldron said, “The Reserve Bank’s decision to slow the pace of tightening is great news for households, but I don't think we’ve seen the end of rate rises yet. I urge anyone hoping to buy this Spring, or any borrowers seeking a better deal on their home loan, to meet with their mortgage broker so they can put their best foot forward.”