Australian mortgage holders can breathe a sigh of relief following the Reserve Bank of Australia’s decision to pause cash rate hikes.
For ten consecutive months the RBA had hiked the cash rate, bringing it from a pandemic-induced low 0.1 per cent to 3.6 per cent.
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However, the bank on Tuesday met and handed down their decision to pause the hikes.
Australia has also seen weaker than expected inflation numbers for the month, contributing to the rate pause decision.
The inflation rate is currently sitting at 6.8 per cent.
RBA Governor Phillip Lowe said the board’s decision “follows a cumulative increase in interest rates of 3.5 percentage points since May last year”.
“The Board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt,” Lowe said on Tuesday following the decision.
“The Board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.”
However, Lowe added the “decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy.”
“The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target,” he said.
Mortgage stress on the rise
Meanwhile, the outlook for mortgage holders is bleak, but higher interest rates are also making it harder for first time home owners to buy without falling into mortgage stress.
New Canstar analysis shows the average would-be solo home owner would need to earn $165,695 a year to buy a home without falling into mortgage stress.
The average annual before-tax income is $94,000.
The research explored how much buyers needed to earn to afford a house with a 20 per cent deposit but without contributing 30 per cent or more of their after-tax income toward repayments, which is how mortgage stress is defined.
With property prices already tracking back up despite the possibility of further rate rises, Canstar money expert Effie Zahos said home ownership would be even further out of reach for single-income earners.
“Even if there is a pause in April, it is expected the cash rate will be hiked up at least one more time during this cycle, meaning mortgage stress isn’t going away anytime soon,” she said.
– With AAP
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