RBA hold interest rates as mortgage holders issued warning over further relief
RBA governor Michele Bullock has confirmed the cash rate will remain on hold at 4.10 per cent. · Source: Getty
The Reserve Bank of Australia (RBA) has kept the cash rate on hold at 4.10 per cent today. Mortgage holders received a long-awaited interest rate cut in February and many are now desperately waiting for more relief.
While inflation is continuing to ease, the RBA board said there were still “risks on both sides” and it was “cautious about the outlook”. It said it needed “to be confident” that progress would continue and inflation would return to its 2 to 3 per cent target band “on a sustainable basis”.
“Sustainably returning inflation to target within a reasonable timeframe is the Board’s highest priority,” it reiterated.
RELATED
A back-to-back rate cut was considered unlikely due to the RBA’s hawkish rhetoric last month, with RBA governor Michele Bullock stressing that last month’s cut did not foreshadow more were on the way.
Australia’s inflation rate eased again in February, with headline inflation dropping to 2.4 per cent. Underlying inflation, which strips out volatile items and government subsidies, dropped to 2.7 per cent.
Uncertainty over the global impact of US President Donald Trump’s tariffs also meant some thought the board would err on the side of caution today.
Are you a mortgage holder with a story to share? Contact tamika.seeto@yahooinc.com
The board acknowledged tariffs were “having an impact on confidence globally and this would likely be amplified if the scope of tariffs widens, or other countries take retaliatory measures”.
“Inflation, however, could move in either direction. Many central banks have eased monetary policy since the start of the year, but they have become increasingly attentive to the evolving risks from recent global policy developments,” it said.
The board said monetary policy in Australia was “well placed to respond to international developments if they were to have material implications for Australian activity and inflation”.
Yahoo Finance contributor and economist Stephen Koukoulas said he was “shocked” to see the RBA hold interest rates, despite its messaging being “littered” with reasons why rates should be cut, including inflation “falling substantially”.
————-
“Dreadful decision. I feel sorry for the tens of thousands of people who will be unemployed as a result of this decision,” he said.
A Yahoo Finance poll of more than 2,000 readers found 63 per cent of Aussies thought they needed four more interest rate cuts to feel “financially secure”, while 18 per cent would need three.
CBA and Westpac expect there are still three more cuts to come, with the next cut predicted to happen in May.
NAB thinks there will be four more cuts in this cycle, with May also pencilled in for the next move. ANZ expects just one more cut in August.
But Mozo personal finance expert Rachel Wastell said borrowers don’t need to wait for the RBA to move to give themselves a rate cut.
“Most home loan holders are still with a Big Four bank, but it’s the challenger lenders and mutual banks offering the most competitive rates at the moment, with G&C Mutual Bank, Australian Mutual Bank, People’s Choice and The Capricornian leading the charge,” Wastell told Yahoo Finance.
According to Mozo’s database, 71 lenders are now offering rates at 5.99 per cent or lower.
“So if your home loan rate starts with 6, you could give yourself two rate cuts or more by switching, rather than waiting for the RBA to move,” she said.
While the banks were quick to pass on the February interest rate cut in full, Wastell has also warned banks might not be as generous when cuts continue.
“In past rate cut cycles, the first has often been passed on in full, followed by a split in which lenders pass on subsequent cuts,” she said.
In June 2019, only half of lenders passed on the full rate cut to borrowers. This dwindled in subsequent cuts, with only 15 per cent passing it on in July and 9 per cent in October.
Similarly, the first emergency rate cut after the pandemic broke out saw just 13 per cent of lenders not pass it on in full. With the second cut, ANZ was the only lender to pass on a partial cut.
“Homeowners should be keeping a very close eye on their lender’s response to the RBA moves and be prepared to make the switch or at least try to negotiate if they don’t see the full benefit of further cuts,” Wastell said.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.
