Hoping for an interest rate cut soon? RBA says ‘don’t hold your breath’
The RBA increased the cash rate to 3.85% at its meeting in February.
According to the minutes of the last RBA meeting, we might be strapping in for even more interest rate hikes.
The minutes of an RBA meeting are released two weeks after. The ones released this week show what the Reserve Bank discussed as it decided to increase the cash rate.
And if you were hoping that one cash rate rise might magically fix all of our inflation problems… I'm sorry to bring you back down to reality.
Worried about your home loan rate?
With interest rates rising, compare other rates on the market to see if there's a better deal.
What does the year ahead look like now?
The reason the RBA increased the cash rate at the February meeting was down to inflation sitting above 3% with no sign of coming back down.
Unfortunately, the RBA doesn't expect inflation to come back down to its preferred range of 2% to 3% before mid-2027. In fact, it's expected to go up even further in the middle of this year, in part thanks to the ending of energy rebates.
Bringing the inflation figure down to below 3% by mid-2027 will require some more cash rate intervention though.
We only get there if we follow the projections, and those projections show another 0.60% being added to the cash rate. Sorry.
What does this mean for your home loan?
Well, mostly it means your interest rates could be going up. If you're on a 5.25% interest rate right now, you'd be on a 5.85% interest rate if the market projections are correct.
But let's remember: back in November the market projections thought we'd get a 0.30% reduction this year.
It's also worth noting that experts are torn on what will happen for the rest of the year. Some think that RBA has announced its one and only cash rate increase, others range between 1 to 3 more for the rest of the year.
So although fixing your home loan rate might be very tempting right now, no one really knows what's going to happen.
Typically, the longer you lock in a fixed rate, the lower the interest rate will be. But so much can happen in the space of 3 to 5 years.
Because there's no way to really know if fixing your interest rate will work out cheaper for you in the longer term, fixing your interest rate is really about getting the certainty of stable repayments over time.
Calculate what your repayments would be if they increased and work out if you could manage them. Calculate what your repayments might be if you fixed your home loan rate, and decide if you're comfortable with those repayments for that time period. Remembering that you would miss out if variable rates did fall in that time.
Thinking of fixing your home loan rate?
Take a look at fixed home loan rates to see if you could save.
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