The big takeaway from the RBA’s rates call

Stability, that’s what we get from this week’s decision by the Reserve Bank to leave interest rates on hold at 4.1 per cent. It’s the third straight month Philip Lowe’s board has paused its current rate-hiking cycle since it first began a lift in May last year. 

I was having a chat with my mate Paul Hixon, senior mortgage broker at Loan Market, after Tuesday’s RBA delivery, who tells me he’s been fielding phone calls at every level from clients asking the ‘what’s next?’ question.

“The good thing about the recent hold is that it gives stability,” Hixon said.

“People can budget accordingly now from the rate. They’ll add a bit to repayments now, and can start to base their purchase budget around today’s repayment.”

Of course this doesn’t mean we’re out of the woods, but the counteract to this is migration which continues to lift prices. 

“People see prices move in an upward direction,” Hixon said.

“They’re not sure about interest rates and so forth, but monthly stability and a moving market due to migration gives cause for them to commit.”

Can we be confident in now hitting the peak of this interest rate cycle?

It’s hard to lock in a solid confirmation here. While inflation cooled to 4.9 per cent in July, it’s still well above the central bank’s desired 2-3 per cent. So much money was pumped into the economy for COVID-19, we’re now only really starting to see the effect of the brakes being clamped on. Even Mr Lowe, in his final statement as RBA governor, left a warning note regarding additional rate increases to curb inflation. 

And what of a rate cut?

It’s a forecast many financial experts shy away from publicly predicting after Lowe’s mistake back in 2021 when he said rates would not increase until at least 2024. My take on it is to not hold your breath, at least until we’re well into next year. 

So, the great news – the ship is steady, Queensland migration numbers remain outstanding, and buying now can be done with a return of confidence in repayment figures.

I hope you enjoy the read.

Matt Lancashire