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Lowe leaves on a hold: but are there more rate rises to come?


The Reserve Bank of Australia (RBA) has held the cash rate for the 3rd month in a row, as two-thirds of economists believe the rate has now peaked.

97% of economists surveyed by Finder correctly believed that the RBA would hold in September. That's because inflation figures have continued to slow over the past few months.

Mortgage holders have seen interest rates rise 12 times since May last year, rising 4% over that time. On today's average mortgage amount, those rate increases amount to an extra $1,320 in repayments.

Is this the end of rising interest rates?

Two-thirds of the economists Finder surveyed think so, yes. But, there are also those who think rates are likely to rise again. Inflation is still higher than the RBA's target range of 2-3%, with it's last quarterly figure in June sitting at 6%.

Economists had been divided on how high the cash rate would go, but it was at one point predicted on average to peak at 4.44%. As inflation has slowed faster than expected, that peak has dropped to 4.2%. That still means there could be at least one more rate rise on the horizon.

Jason Azzopardi, from mortgage lender Resimac, said the inflation figures "will allow the RBA to delay further increases for a short period of time". But he added: "I do...believe lowering inflation to the target band will require further increases."

Today's RBA decision was the last one as Governor for Philip Lowe, who will be replaced later this month. This means that there may have been less pressure on him to act with another interest rate increase, particularly as inflation has been reacting well to the rate hikes already implemented. All eyes are on the incoming Governor to see what moves she will make.

What should you do now?

For most borrowers, the RBA decision to hold means that their mortgage repayments won't change. If you're managing to meet your repayments, you don't need to do anything for now.

If you've been struggling with mortgage repayments, however, it might be time to speak to your lender as rates aren't expected to fall for some time.

Any borrowers who are coming off a fixed rate home loan should make sure they're on the best deal. Those on 2-year or 3-year fixed rates will have taken out their home loan at a time of record low interest rates and will see the full 4% increase in one go.

Check with your existing lender to see what your new variable rate will be, remembering that they won't necessarily put you on the best rate automatically. Once you know your new rate, speak to your lender about refinancing and compare variable rates with other lenders and consider switching your loan.

Thinking of refinancing? Compare other variable rates now.

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