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The cash rate has remained on hold, however, looming uncertainties over inflation persist for the central bank.
The Reserve Bank of Australia (RBA) has held the cash rate steady at 4.35 per cent during the March monetary policy meeting.
In the post-meeting statement by the RBA, the board stated that the “path of interest rates that will best ensure that inflation returns to target in a reasonable time frame remains uncertain and the Board is not ruling anything in or out.”
“Returning inflation to target within a reasonable time frame remains the Board’s highest priority. 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,” RBA said.
“To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.”
The decision to hold was largely expected by the mortgage broking industry on the back of recent inflation and gross domestic product (GDP) data indicating signs of a slowdown in Australia’s economy.
Furthermore, the ASX rate tracker as of 18 March had predicted 95 per cent “no change” and a 5 per cent chance of a decrease to 4.1 per cent.
Speaking during the House of Representatives standing committee on 9 February, RBA governor Michele Bullock stated the board may consider removing the restrictive nature of monetary policy if it remains confident that the target band will still be achieved.
Ahead of the meeting, chief executive of aggregator Finsure Group, Simon Bednar, will maintain a “steady as she goes” approach to monetary policy.
Bednar added that mortgage holders should “be confident of interest rates going no higher, with prospects of a cut before the end of the year”.
“It makes sense for the RBA to keep rates on hold at their March meeting,” Bednar said.
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“I expect the board is pleased with the progress with the battle to control inflation, and they don’t want to stimulate spending with a reduction at this stage.
“However, overall, the year is looking more buoyant and positive so expect at least one cut before Christmas.”
Bednar further stated with previous interest rate increases making conditions more difficult for mortgage holders, brokers have been playing a “key role helping customers through the higher rates and the cost-of-living crisis”.
Mortgage Choice CEO Anthony Waldron said the decision to hold was “unsurprising" given the latest economic data.
“The economy is slowing, annual inflation is at the lowest level seen since November 2021, and households are cutting back on spending, suggesting that high interest rates are having the intended effect,” Waldron said.
“The Reserve Bank will continue to be guided by the available economic data. While the signs point to a rate cut later this year, there’s no way to predict exactly when a cut might occur.”
As such, Waldron has urged borrowers to “take control of their home loans now, rather than wait and see”.
“If you’re planning to buy a property in the coming months, make an appointment to speak to your broker to understand your borrowing power and explore your loan options,” he added.
Reacting to the decision, executive director for aggregator Connective, Mark Haron, said: “Aussies have been given another brief reprieve with the hold on interest rates this month.
“We anticipate potential rate cuts later this year if inflation continues its downward trend. This, combined with steady rates, could stimulate growth across the property market.
“Borrowers are already showing renewed interest with our data revealing that January and February applications are up 15 per cent on the prior year. This trend is likely to flow on to settlements later in 2024, highlighting the increasing demand for brokers.
“Brokers remain a crucial resource for borrowers. It’s an opportunity for them to focus on delivering outstanding outcomes for their clients by sharing knowledge and informing clients so they can make informed financial decisions.”
Executive chairman of LMG, Sam White, said today’s hold gives consumers a “clear outlook for their purchasing journeys”.
White further stated although there was a large portion of borrowers adjusting to a higher rate environment, LMG brokers were “fielding healthy levels of inquiry for new loans”.
“Across the LMG network, we’ve seen a 5 per cent increase in pre-approvals for the start of 2024 compared to the same time last year,” White said.
“The increase in interest corresponds with activity in the auction markets with our affiliated real estate network Ray White recording three out of four properties selling under the hammer in March.”
He added that brokers can expect the increase in borrower activity to continue into midyear.
[RELATED: Brokers expect a quiet month for the RBA]
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