Mortgage holders can breathe a sigh of relief with the Reserve Bank of Australia holding steady on interest rates for a third consecutive month.
The RBA board met on Tuesday and decided against hiking the cash rate, leaving it at 4.1 per cent.
Inflation, one of the RBA’s key measures when making rates decisions, softened to 4.9 per cent in July.
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That’s still higher than the central bank’s target of between 2 per cent and 3 per cent, meaning further hikes are still possible.
The big four banks all predicted a pause in the cash rate in September.
Only NAB is predicting another hike this year, forecasting a pause in October followed by a 0.25 per cent increase in November, to see the rate peak at 4.35 per cent.
September’s decision marks the last with Philip Lowe as Governor of the RBA.
His deputy Michele Bullock will take the reins later in the month.
Lowe said Tuesday’s decision allowed the bank time to “assess the impact of the increase in interest rates to date and the economic outlook”.
“Returning inflation to target within a reasonable timeframe remains the Board’s priority,” he said.
Lowe added further hikes may be required to curb inflation.
An extra $1031 a month
Meanwhile, half of all Australians with a mortgage are now considered to be under serious financial stress, according to analysis by financial comparison site Mozo.
Rachel Wastell, Mozo money expert, said repeated rate rises had put pressure on budgets that households were struggling to bear.
“Homeowners are now scrambling to find thousands more every month to cover the jump from 2 per cent rates just a year ago, to rates starting with 5, 6, and 7 today,” she said.
Based on the average variable rate of 6.60 per cent across all lenders in the Mozo database, monthly home loan repayments have now risen by more than $1031 a month for Australians with the average home loan of $500,000 since hikes began last May.
For those with a $1 million mortgage, that jumps to over $2000.
But while Wastell says many borrowers could save thousands in interest by shopping around for a lower rate, many are still reluctant to switch.
Mozo’s research showed one in every three Australians hadn’t refinanced because they thought it was “too much of a hassle.”
“Borrowers should be keeping an eye on the market to see if they can get a better deal on their rate,” Wastell said.
“Refinancing may seem like a hassle, but with online applications speeding up the process and the potential to save tens of thousands of dollars in interest, it’s definitely worth investigating.”
More to come…
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