“For some longer-term context, the current cash rate setting is 1.8 percentage points higher than the pre-COVID decade average of 2.56%,” said Tim Lawless (pictured above left), research director at CoreLogic Asia Pacific.
Despite ongoing high inflation, particularly in the services sector, and the potential for inflationary pressures from recent budget measures, the consensus among economists and financial markets suggests that the next RBA move could be a rate cut, possibly by March next year.
“The consensus among economists is that rate hikes are finished and the next move from the RBA will be a cut, but the timing is highly uncertain,” Lawless said.
While the cash rate has surged, variable mortgage rates have not risen to the same extent, thanks to robust competition among lenders.
The average variable mortgage rate for new owner-occupier loans is now around 6.27%, with rates for investor loans slightly higher at 6.53%.
“No doubt borrowers are shopping around for the best rates,” Lawless said.
Despite the stability in housing prices and an increase in home sales, mortgage arrears are trending upward. According to APRA data for the March quarter, 1.6% of home loans are now in arrears, up from 1% in the previous quarter.
“With interest rates set to hold at their current levels until at least late this year, alongside a gradual loosening in labour market conditions and reduced saving buffers for most borrowers, it’s likely mortgage arrears will rise further,” Lawless said.
While RBA has opted to hold rates, Simon Bednar, CEO of Finsure Group, suggested that factors like stubborn inflation and a strengthening job market could prompt the RBA to raise rates again.
“We still have stubborn inflation to contend with, coupled with a strengthening job market and upcoming government stimulus including tax cuts.” said Bednar (pictured above right). “For that reason, I think the RBA would be justified in lifting the cash rate, and then hold steady for the rest of the year.”
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