The Reserve Bank initially eased the cash rate from 4.35% to 3.60%, but it has since moved back up to 4.10%.
What lies ahead, and what should you do?
In the view of most experts, the Reserve Bank was expected to wait for the March inflation figures (released in April) before making a move, with a possible rate rise in May.
However, the Iran-induced surge in oil prices brought that decision forward.
If the conflict settles, the Reserve Bank may hold steady in May. If not, the May meeting becomes “live” again, and rates could return to where they were previously — around 4.35%.
Why the shift?
The Reserve Bank has been navigating two key challenges:
- Government trickery with electricity rebates temporarily pushed inflation down, before it rose again once those rebates ended. This may be effective politically, but it creates distortion economically.
- As a result, when the oil price shock hit, inflation was already sitting at 3.8%, leaving little room to absorb further pressure.
Compared to other countries, Australia’s response has been somewhat out of step, with others managing inflation more smoothly. However, the reality is we must work within the conditions we have.
What does this mean for you?
While everyone prefers lower rates, we’ve already seen that households can manage at 4.35% — and we may need to again.
My role is to keep your bank honest and, where it makes commercial sense for you, explore refinancing opportunities.
For now, I recommend maintaining your current repayment levels, with the reassurance that I am continuously monitoring your loan and the broader market.
Ongoing support
As part of the regular six-monthly reviews I conduct for you, I’ll ensure your loan remains competitive and aligned with your goals. As always if you’d like advice tailored to your own personal circumstances, please call or email me anytime… It’s what I’m here for.
Alan Heath – Ask Alan Mortgage Brokers