RBA keeps hold on the cash rate bringing relief for homeowners

A young couple examine their mortgage payments. Image source: fizkes/Shutterstock.com

The Reserve Bank of Australia has kept the cash rate on hold again at 4.1%, another welcome relief to homeowners. That should mean lenders also hold off from any increase in their interest rates for people still paying off their mortgage.

The RBA’s governor Philip Lowe said inflation was still too high but it had shown some decline of late.

“The higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so,” the board said in a statement today.

“In light of this and the uncertainty surrounding the economic outlook, the Board again decided to hold interest rates steady this month.”

All eyes are on the inflation figures

The RBA started increasing the cash rate in May last year as part of its battle against inflation. There have only been three pauses in the cash rate – the first in April and then in July and August this year.

Economists had been expecting the RBA would hold the cash rate again this September. All eyes have been on the latest consumer price index (CPI) figures to see what impact the RBA’s strategy was having on inflation.

The most recent quarterly figures from the Australian Bureau of Statistics (ABS) show inflation has eased from a 7.0% annual rise in the May quarter to 6.0% in June, suggesting inflation may have peaked for now and the rate of price growth may be on the decline.

But that figure is still way ahead of the RBA’s target of inflation between 2% to 3% over time.

The latest monthly inflation data from the ABS, released late last month, shows CPI at 4.9% in the twelve months to July, down from 5.4% the month before. But the monthly CPI figures are prone to some volatility, compared to the quarterly CPI figures.

“Inflation in Australia has passed its peak and the monthly CPI indicator for July showed a further decline,” the RBA board said.

“But inflation is still too high and will remain so for some time yet.”

What next for the cash rate?

The RBA may have held off on any further hike in the cash rate this month but that may be only temporary relief for homeowners. Some economists have flagged further hikes in the cash rate may still be on the cards.

Today’s meeting was the last with Philip Lowe in charge as RBA governor. The current deputy governor Michele Bullock takes over the role on 18 September.

But the board statement again flagged the possibility of “further tightening of monetary policy” in its battle against inflation. The forecast was for CPI inflation to be back within the 2% to 3% target range in late 2025.

How can I save on my home loan rate?

If your fixed rate home loan is about to come to an end, or even if you think you could be getting a better deal than what you’re currently paying, you can compare home loans with Canstar to see what your options might be, and if there’s a more favourable deal out there for you.

“The rate pause will give borrowers another opportunity to reflect on what interest rate they are paying and whether or not they can find a better deal,” says Canstar’s Editor-at-Large and money expert Effie Zahos.

“The latest lending data from the Australian Bureau of Statistics highlights that borrowers are still chasing better interest rates. A record $21.5 billion in loans were switched to a new lender in July – an increase of 5.4 per cent from June and is 21.8 per cent higher than the same period last year.

“As a number of lenders continue to increase variable rates, some borrowers may be able to lock in a quick saving by fixing their home loan rate.

“At 5.63 per cent, the cheapest two-year fixed rate on Canstar’s database is 1.05 percentage points below the average variable rate of 6.68 per cent. This provides immediate savings and repayment certainty for two years but, of course, there are pros and cons to locking in.”

If you are thinking about refinancing your current home loan to a new lender and want to know more about the process and how it works, Canstar has a list of seven mistakes to avoid when refinancing, so you can be better prepared to strike a new deal.

The next RBA board meeting is on Tuesday 3 October.

Cover image source: fizkes/Shutterstock.com

This article was reviewed by our Content Lead Ellie McLachlan before it was updated, as part of our fact-checking process.

Michael Lund

Former Senior Finance Journalist

Michael is an award-winning journalist with more than three decades of experience. As a senior finance journalist at Canstar, Michael wrote more than 100 articles covering superannuation, savings, wealth, life insurance and home loans. His work's been referenced by a number of other finance publications, including Yahoo Finance and The Motley Fool.

Michael's worked as a reporter and producer for the BBC and ABC, including for Australian Story. He's also worked as a feature writer for The Courier-Mail and as a science and technology editor and commissioning editor at The Conversation.

Michael's professional awards include a Queensland Media Award and a highly commended in the Walkleys. In 2021 he was part of a team that was a finalist in the Australian Museum Eureka Prize for Science Journalism. He holds a Bachelor of Science in mathematics and applied physics (Manchester Metropolitan University) and a Masters of Science in pure mathematics (Liverpool University).

You can connect with Michael on LinkedIn.