The Reserve Bank (RBA) has decided to keep the cash rate steady at 4.35%, where it has remained since November last year.
The decision comes as the quarterly rate of core inflation eased back to 0.8% in the June quarter, aligning with the RBA's May forecast and down from 1.0% in the March quarter.
Tim Lawless (pictured above left), research director at CoreLogic Asia Pacific, noted that the easing in the trimmed mean rate of inflation, soft economic growth, and a gradual loosening in labour markets have all contributed to staving off another rate hike.
While a stable interest rate decision is seen as a positive for borrowers and housing more broadly, it is not expected to materially influence housing trends.
“Although a stable interest rate decision is seen as a positive for borrowers and housing more broadly, we aren’t expecting today’s outcome will have a material influence on housing trends,” Lawless said.
He said that recent growth in property prices has been driven more by low supply, tight rental conditions, and demographic factors than by consumer sentiment.
Despite RBA’s decision, affordability remains a significant barrier, with the trend rate of home sales easing and affordability becoming more challenging.
“Even if sentiment lifts, an improvement in affordability barriers or strengthening in household balance sheets isn’t likely until interest rates start to fall,” Lawless said.
Anthony Waldron (pictured above centre), CEO of Mortgage Choice, commented, "The Reserve Bank’s decision to keep the cash rate on hold will be welcome news to borrowers and buyers alike.”
He stressed the importance of the ongoing stability in home loan interest rates in supporting buyer and seller confidence heading into the 2024 spring selling season.
Cameron Kusher, PropTrack director of economic research, also noted that stable interest rates are likely to support vendor and purchaser confidence as the busier spring period approaches.
Kusher added that the rate of growth in home prices has consistently slowed over the past five months, with the lowest number of annual dwelling approvals in more than a decade.
While the RBA board is leaving their options open, the next movement in interest rates could be downward if the inflation trajectory continues to ease. However, affordability pressures and a potential housing supply response might limit price growth even as rates come down.
Fears of a potential recession in the United States are also weighing on RBA.
“If the US experiences a slowdown as seen with the cooling off of their job market, our RBA may be forced to lower rates slightly earlier than expected,” said Simon Bednar (pictured above right), CEO of Finsure Group.
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