Happy days! The Reserve Bank kept rates steady in February. But a shake-up in the number of times our central bank meets each year is raising questions about how long the rate pause will last. Here’s what we could expect.
It seems fitting that in a month known for Valentine’s Day, the Reserve Bank of Australia (RBA) has shown borrowers some love by keeping the cash rate steady at 4.35%.
In reality though, the latest rate pause has nothing to do with romance or affection.
It’s more to do with keeping a lid on rising living costs.
After months of steadily rising prices, inflation looks to be heading south – currently sitting at 4.1%, down from 7.8% in December 2022.
That’s exactly what the RBA has been aiming for with their interest rate hikes.
Long story short, home owners can breathe easy – for now at least.
But when will the next cash rate decision be made?
RBA rate calls won’t be as frequent in 2024
Aussies are used to RBA rate decisions being made on a monthly basis, with a break for the holiday season each January.
That’s changing this year.
Instead of 11 meetings, the RBA will meet just eight times to decide interest rate movements, handing down their decision on the second day of:
– February 5-6
– March 18-19
– May 6-7
– June 17-18
– August 5-6
– September 23-24
– November 4-5
– December 9-10
What do less frequent meetings mean for borrowers?
So, whatever rate decision is made in March, home owners need to live with it for almost two months until the RBA meets again in May.
As such, some pundits believe fewer meetings will naturally lead to fewer rate movements. Farewell to back-to-back rate hikes every month, for example.
However, experts also warn it might lead to bigger increases or decreases as the RBA has fewer opportunities to move the needle.
And that’s not to say individual lenders can’t, or won’t, change their home loan rates whenever they like, regardless of RBA rate decisions.
For example, Mozo reports that a number of lenders lifted their variable rates in December 2023 despite the RBA keeping the cash rate steady.
Buy now or wait for rates to fall?
While the February rate pause will be welcomed by borrowers, the RBA has cautioned that further rate hikes “cannot be ruled out”, especially if inflation starts to climb again.
Even so, plenty of lenders including NAB, the Commonwealth Bank and Westpac, expect to see interest rates fall this year.
There are no guarantees – a lot can happen over the next 12 months. But it does raise questions about whether now is a good time to buy a home, or if it makes sense to hold off until rates head lower.
On one hand, a drop in interest rates could boost your borrowing power.
The catch is that lower rates could stimulate home buying activity, potentially driving home prices higher.
If this happens CoreLogic warns we could see new measures introduced to contain housing credit risk such as changes to lenders’ loan-to-value ratios.
So when might be the right time to buy?
We believe the ideal time to buy a home is when you feel ready to do so.
And a good way to find out if you’re ready is to speak to us about your borrowing power.
We can help you crunch the numbers to let you know how much you could borrow, which in turn helps you figure out what kind of property you could afford to buy.
If that sounds like a good plan to you, give us a call today.
Ollie Hooper – Mortgage Broker (Stax Home Loans) m: 0401 032 868
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