Australian mortgage holders can breathe a sigh of relief with the Reserve Bank holding steady on interest rates in consecutive months for the first time in more than a year.
The RBA board met on Tuesday and decided not to hike the cash rate, mirroring the July decision.
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It marks the first time the interest rate has remained unchanged in consecutive months since rates were hiked from the pandemic-low of 0.1 per cent last May.
The cash rate remains at 4.1 per cent.
Governor of the Reserve Bank of Australia Philip Lowe said the board’s decision to pause the cash rate hikes was due to “uncertainty surrounding the economic outlook”.
“Interest rates have been increased by four percentage points since May last year,” he said.
“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.
“In light of this and the uncertainty surrounding the economic outlook, the board again decided to hold interest rates steady this month.
“This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.”
Lowe added inflation in Australia was declining but was “still too high at 6 per cent”.
“The central forecast is for CPI inflation to continue to decline, to be around 3.25 per cent by the end of 2024 and to be back within the 2–3 per cent target range in late 2025,” he said.
Meanwhile, RateCity.com.au research director Sally Tindall said household savings had “finally gone down” for the first time since May 2021, a factor the RBA considers when adjusting the cash rate.
“The total savings buffer across households is now on the decline as many families eat into their cash supplies to combat the double whammy of rising rates and cost of living pressures,” she said.
“While this turnaround is yet another sign the rate hikes are finally taking their toll, with $1.37 trillion still in the bank in savings accounts, term deposits, transaction and offset accounts, there’s still a giant buffer propping up the impact of these hikes for some Australians.
“The problem is, some households are still managing to build up their war chests, while others ate up their savings buffers months ago and are now struggling to stay afloat.”
Tindall advised borrowers to plan for at least two more hikes, and added “preparing for higher rates is never a bad idea”.
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