The RBA has decided to keep rates on hold at their December meeting, to give Aussie homeowners an early gift coming into the holiday season.
Keeping the cash rate at 4.35% as per most economists predictions, comes off the back of lower inflation figures, with some suggesting the economy ‘could’ be in the right track.
Michelle Bullock in her relatively new role noted that October inflation figures covered mainly goods and services which the central bank has the most concerns about.
“The limited information received on the domestic economy since the November meeting has been broadly in line with expectations. The monthly CPI indicator for October suggested that inflation is continuing to moderate, driven by the goods sector; the inflation update did not, however, provide much more information on services inflation. Overall, measures of inflation expectations remain consistent with the inflation target”
Bullock also said in her statement, “There are still significant uncertainties around the outlook. While there have been encouraging signs on goods inflation abroad, services price inflation has remained persistent and the same could occur in Australia. The outlook for household consumption also remains uncertain, with many households experiencing a painful squeeze on their finances, while some are benefiting from rising housing prices, substantial savings buffers and higher interest income”.
Given that the RBA doesn’t meet again until February there will be some light relief for mortgage owners until at lease then.
Before today’s meeting Luci Ellis, Chief Economist at Westpac said about February’s meeting, “We reaffirm our view that the RBA Board would raise the cash rate at that meeting if it sees further upside surprises to inflation or fresh evidence suggesting that inflation will decline more slowly than it intends. If things play out broadly in line with their forecasts, though, further moves would be harder to justify. In that case, it would be likely that the RBA would hold the cash rate steady. Currently we believe this is the more likely outcome”.
What can you do with rising rates ?
As the lending slows down on new purchases, the rate war heats up between Banks. They offer lower variable rates and sometimes cash back incentives to lure customers from their current Bank. This is good news for the consumer in that they can choose a new lender and lower their repayments.
If you are on a fixed rate with your current lender that is much lower than any variable rate available.
a) you would lose the benefit of that rate and
b) Your Bank may charge you for breaking the fixed rate.
In recent times the Bank would rather cancel your current 2.09% Fixed Rate then lend that money elsewhere at 6.34%.
Definitely worth talking to Red10 Finance about whether or not there is a better deal out there for you ! Remember that the next meeting of the RBA is on 6th February 2024.
