It’s the early Christmas gift borrowers were hoping for – the Reserve Bank of Australia has held the cash rate.
Compare the Market’s Economic Director, David Koch, said the decision was a welcome relief for borrowers who had already seen repayments climb thousands of dollars since May 2022.
“The average borrower with a loan of just under $600,000* is now paying about $1,549 more every month,” Mr Koch said.
“That could be round trip flights to Asia, paying off a new phone, or nearly two months’ worth of groceries.
“Homeowners are under more than enough pressure right now, so I think the RBA has made the right decision to hold the cash rate.”
Australians with a $750,000 mortgage on a variable rate could already be paying $1,940 more each month than they were at the start of May 2022.
| Mortgage size | Increase in average monthly repayments since the start of May 2022 (4.25%) |
| $500,000 | + $1,293 |
| $600,000 | + $1,552 |
| $750,000 | + $1,940 |
| $900,000 | + $2,328 |
| $1,000,000 | + $2,586 |
| Reserve Bank Lenders’ Interest Rates. Monthly repayments do not include any reduction in the mortgage balance over time. These calculations assume: An owner-occupied variable interest rate of 2.86% p.a in May 2022; principal and interest (P&I) repayments; cash rate increases are passed on in full; the loan term is 30 years; and there are no monthly fees. | |
Latest CPI data shows inflation fell from 5.6% to 4.9%, inching closer to the RBA’s target range of 2%-3%.
Mr Koch said the signs were promising, but future rate cuts would depend on whether the “Goldilocks” zone could be met and sustained.
“The December quarter CPI figure released on January 31 is going to be crucial in the future direction of interest rates,” Mr Koch said.
“It’s not likely to get any worse, but higher rates may be here to stay for some time.
“While we can’t depend on the RBA to deliver rate cuts, borrowers need to be savvy if they want to save.
“If you haven’t refinanced for a few years, there’s a good chance you’re on a back-book rate that could be costing you hundreds of dollars more a month.
“If your lender isn’t discounting, make 2024 the year of the new lender for you.”
*Average loan size $599,000 ABS Lending Indicators data, September 2023 https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release
For more information, please contact:
Natasha Innes | 0416 705 514 | [email protected]
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