The RBA Holds the Cash Rate for its Final Decision of 2023
The Reserve Bank of Australia (RBA) has made its final decision for the year, on December 5th, 2023. In its final monetary policy meeting, the RBA holds the cash rate at 4.35 per cent. This decision marks the sixth cash rate hold this year.
Here’s why the RBA holds the cash rate.
RBA Governor, Michelle Bullock, explains that the decision was made in response to the ongoing impact of recent interest rate increases, and aims to assess their effects on demand, inflation, and the labour market. Bullock exclaims, “Higher interest rates are working to establish a more sustainable balance between aggregate supply and demand in the economy. The impact of the more recent rate rises, including last month’s, will continue to flow through the economy.”
This announcement brings major relief to thousands of households, which, on average, have faced over $24,000 extra in interest due to 13 interest rate hikes since May 2022.
Bullock acknowledged that there are still uncertainties lingering in the economic outlook and emphasised that future adjustments to monetary policy will hinge on evolving data and risk assessments, particularly regarding inflation returning to target within a reasonable timeframe.
Has this decision to hold the cash rate provided borrowers with potential breathing room during the expensive holiday season?
Households are still expected to experience a painful squeeze on their finances, while some are benefiting from rising house prices, savings buffers, and higher interest income.
Now is the time to assist your clients and borrowers to review their home loan and ensure that their finances are up to date and their loan is still competitive. What available products are the most competitive in the market?
What does the future of interest rates look like in 2024?
It’s hard to know how next year will start. LMG’s executive chairman Sam White says there is still lots of uncertainty, however, with the RBA Board not meeting again until February, there is a window of stability that will hopefully extend into 2024. This will give borrowers improved confidence in their decision making.
What should brokers do in 2024?
Whilst the RBA holds the cash rate for end of 2023, it is expected that mortgage brokers should be looking ahead to 2024, considering what borrowers and homeowners should expect in the coming year. With the RBA holding the cash rate for the final monetary policy decision of 2023, it is likely we will see an increase in interest rates at some point in 2024. Consequently, this will impact those with mortgages.
Brokers should be mindful of the changing market and be ready to advise their clients in case of a rate shift. While we don’t know for certain what will happen in 2024, being prepared is key – it is sure to be an interesting year for all involved!