As predicted by most economists, the Reserve Bank of Australia (RBA) opted to maintain the cash rate at 4.35% for the sixth time in a row at its June board meeting today.
This decision comes amidst ongoing concerns about inflation and a mixed economic outlook while mortgage holders continue to do it tough.
The Board said inflation has been easing but has been doing so more slowly than previously expected and it remains high.
“The Board expects that it will be some time yet before inflation is sustainably in the target range. While recent data have been mixed, they have reinforced the need to remain vigilant to upside risks to inflation,” the Board said.
“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 rely upon the data and the evolving assessment of risks.”
While a high-rate environment continues to put pressure on mortgage holders, Aussie franchise brokers Matthew Rogers and Dipal Patel were unsurprised by the RBA's decision.
Rogers (pictured above far left), director of Aussie – Inner West in Sydney, said the central bank are not going to make any “hasty decisions” when it comes to the cash rate.
“We were anticipating a hold due to the inflation and low unemployment rate data. We welcome the hold given the current hardship we are seeing in the economy.,” Rogers said.
“Inflation figures this year have been mixed and they’ll continue to watch this before making a move.”
While inflation came in slightly higher than expected at 3.6% for the March quarter, still exceeding the Reserve Bank’s target range of 2% to 3%, Dipal Patel, director of Aussie – Seven Hills, said Australia is in a “much better position” compared of the start of last year.
“Inflation is now half of what it was a year ago and hopefully achieving the target by end of this quarter,” said Patel (pictured above centre left).
While a hold in rates gives clients clarity on their budget, mortgage broker Chris Mushan said if they were falling behind already the effect of the previous rate rises has “a snowball effect”.
In March 2024, there were nearly $14.7 billion worth of residential loans behind in repayments between 30 and 89 days. Arrears of 30-89 days past due increased 15% year-on-year, while arrears of 90+ days past due were up 17%, according to Equifax.
“It’s tough,” said Mushan (pictured above centre right), director of ChapterTwo. “And if you couple the rate rises with clients who already had unsecured debts and car loans, it is becoming unmanageable.”
With mortgage arrears on the rise after two years of steep hikes, it's no surprise that Rogers has seen a lot of his customers experiencing rate anxiety.
Rogers said while rates have been on hold for a while now, and some are getting used to the new normal, “many are near breaking point”.
“Another decision to hold rates is not the worst outcome but it’s the unknown that feeds the rate anxiety many are feeling.”
Gerard Hansen (pictured above far right), director of FinVu Financial Services, has found his clients are becoming better prepared.
“All of my clients were bracing themselves for this decision, with a view that rate cuts will happen later in the year,” Hansen said.
Hansen said he had spoken to several retail clients who advised him that “spending is down, and people are holding onto their cash”.
“One restaurant owner client advised that he would like to increase his supreme pizza price - but who is willing to pay an extra $10? Clients are riding the economic tightrope,” Hansen said
Hansen said his clients had also mentioned the July 1 government stimulus that is set to boost the economy.
“The general worry is that we will spend more, and the RBA’s response will be to slow down the economy further by increasing rates,” Hansen said.
“One thing for sure - ever in my history of lending have clients been more informed about monetary measures including inflation and interest rates. My pizza shop owner should run a podcast.”
Patel has urged her urged her clients to remember that just because the cash rate holds, doesn’t mean they should hold.
“It’s the biggest financial asset of their lifetime, and regularly reviewing it is essential – just like you do any other service such as your utilities,” said Patel who recommends checking in every six months.
“We’re also seeing out-of-cycle rate changes, particularly by some of the small lenders. Just because the cash rate is standing still, mortgage holders shouldn’t be,” she said.
“That’s what brokers are here for. I’ve had many a discussion with customers who were just not aware of how much they could save. A good broker should also always be checking in with their customers – especially in times like these.”
While brokers may not have a crystal ball, the general wisdom is that the long-awaited rate cuts expected to begin in June or July have now been pushed to November or even later.
Rogers said that 2025 has become more realistic.
While economic indicators are important, much of the RBA’s decision-making will depend on how the inflation data will read over the next two quarters.
One thing is for sure, according to Mushan, another rate hike would “crush a lot of people”.
“Many people we are talking to are just holding on with rate cuts starting to be mentioned in the media,” Mushan said. “For some, its light at the end of tunnel and they believe they can make it through.”
“If there was to be another hike, I think we would see arrears increasing and many people looking for assistance. We don’t think there will be another, and we hope that there isn’t.”
The brokers offered some advice for their colleagues:
Provide balanced information: Understand the customer's needs and tailor repayment options accordingly (fixed or variable) to meet their objectives, according to Rogers.
“You must ensure it fits with their objectives.”
Affordability is key: Ensure a client's overall financial situation is reviewed, said Mushan. Advisers should be wary of suggesting additional credit if borrowers are already struggling.
“Overall, ensuring that your client is in a better position than when they came to you is key.”
Individualised approach: Every customer's situation is unique, Patel pointed out. Brokers can offer personalised solutions, such as negotiating with lenders, reviewing finances, or shopping around for better rates.
“Ultimately, no customer is the same and it’s up to us to present them with options.”
