This decision comes amidst ongoing economic challenges influenced by persistent inflation. According to experts, inflation has been stubborn, particularly evident through the high costs of essential items like groceries and petrol.
The RBA’s pause on rate changes is aimed at maintaining stability, though it may not provide the immediate relief many mortgage holders hope for.
“While the unchanged rate will give borrowers confidence that their current financial circumstances will withstand the pressure points, it’s not the rate relief many mortgage holders are waiting for,” said David Hyman (pictured above right), CEO and co-founder of Lendi Group.
Hyman said high borrowing costs have maxed out many consumers’ financial capacity, causing them to wait for a rate drop before making new purchases.
Despite the holding pattern, some borrowers remain optimistic about potential rate cuts, with one in every four reportedly postponing upgrades in anticipation of more favourable conditions, according to Lendi’s most recent consumer sentiment.
Hyman stressed that there are still opportunities to secure lower rates now, rather than waiting.
“Our brokers have still been able to refinance many homeowners onto a cheaper rate than they expected,” he said, pointing out that some lenders are offering significantly lower rates, potentially saving homeowners up to $180 monthly or more.
With inflation continuing to prove stubborn, coming in higher than expected during the March quarter at a rise of 1% to 3.6%, both Finsure and Lendi think that rate cuts are unlikely this year.
“Inflation continues to prove stubborn... which could reduce the chances of a rate cut this year,” Hyman said.
Simon Bednar (pictured above left), Finsure’s CEO, said that unexpectedly strong inflation data might prompt RBA to increase the OCR from its current 4.35%, to steer inflation back towards its target range of 2-3%.
“Rather than try and nip it in the bud now, they will be waiting to see the next quarterly data given the highly charged nature of another rate rise after the cash rate was increased 13 times over the past two years,” Bednar said. “I think the reality that will be sinking in for mortgage holders is we will not see any reduction in rates during 2024, as we previously thought we would.”
The Finsure leader also underscored the broader economic factors at play, including upcoming wage increases and federal budget implications, which could influence future RBA decisions.
“With the possibility of further rate increases for mortgage holders, brokers will be helping customers cope with the headwinds,” Bednar said.
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