RBA cash rate hold is good news, but borrowers are still struggling
Key takeaways
- The Reserve Bank of Australia (RBA) held the cash rate at 4.35% today. 97% of Finder's experts predicted the decision.
- Today's hold gives borrowers a reprieve from rising interest rates.
- What's next: High inflation and rates are making life hard for borrowers. The RBA could lift the cash rate later this year.
Borrowers can breathe a sigh of relief, at least for now: the RBA is keeping rates on hold.
This means no rate rise this month, and the cash rate stays at 4.35%.
This is good news. A rise today would have taken the cash rate to a level not seen since late 2011, crushing borrowers with higher home loan repayments.
In a unanimous decision, the RBA board said "Following the three increases in the cash rate target since the beginning of the year, financial conditions are now tighter than they were, and there are signs that the economy is slowing as expected."
The board also said that inflation remains high, and the bank is taking a wait and see approach as it "assesses the response to previous interest rate rises and the impact of the oil supply disruption."
All but one of the economists and experts Finder surveyed predicted today's hold, citing slow economic growth and the lagging effect of May's rate rise.
Why did the RBA hold the cash rate today?
Inflation is still higher than the RBA wants it to be. But it already raised the cash rate in May, and the effects of this rate rise are probably still flowing through the economy.
The RBA evidently felt it could hold today and re-evaluate the cash rate later in the year.
The ABS will release its next monthly Consumer Price Index figures on 24 June. If inflation remains high, the stage is set for a likely rate hike in August.
Where does today's cash rate hold leave borrowers?
A break from rising interest rates is a welcome one for borrowers, who've seen their home loan rates rise by 75 basis points this year.
Those rate rises mean the average borrower is paying several hundred dollars a month more in loan repayments than they were at the start of the year.
And with inflation continuing to outstrip wage growth, most people are spending more than they were a year ago. Combined with rising rates and fuel price spikes, life is getting very unaffordable for Australian households.
40% of Australian homeowners tell Finder they're struggling to repay their mortgages. That's up from 35% at the start of the year.
Today's news offers some reprieve, even if it might be short-lived.
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