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RBA reveals July 2023 cash rate call

After 12 rate rises in the last 14 months, will the new financial year bring a different approach from the RBA board? In this special announcement — brought to you by Legal Home Loans — find out if the RBA has increased the cash rate or held it at its current level.

user iconJerome Doraisamy 04 July 2023 Politics
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In its July interest rate decision — its sixth for the year to date — the board of the Reserve Bank of Australia decided to hold the cash rate at 4.1 per cent.

In a statement, RBA governor Philip Lowe said that interest rates have been increased by 4 percentage points since May last year.

“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 decided to hold interest rates steady this month. This will provide some time to assess the impact of the increase in interest rates to date and the economic outlook,” he said.


“Inflation in Australia has passed its peak, and the monthly CPI indicator for May showed a further decline. But inflation is still too high and will remain so for some time yet. High inflation makes life difficult for everyone and damages the functioning of the economy. It erodes the value of savings, hurts household budgets, makes it harder for businesses to plan and invest, and worsens income inequality. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment. For these reasons, the board’s priority is to return inflation to target within a reasonable time frame.”

“Growth in the Australian economy has slowed, and conditions in the labour market have eased, although they remain very tight. Firms report that labour shortages have lessened, yet job vacancies and advertisements are still at very high levels. Labour force participation is at a record high, and the unemployment rate remains close to a 50-year low. Wages growth has picked up in response to the tight labour market and high inflation. At the aggregate level, wages growth is still consistent with the inflation target, provided that productivity growth picks up,” Mr Lowe said.

In conversation with Lawyers Weekly, Legal Home Loans general manager Aylin Unsal said that the decision not to increase the cash rate this month will provide some much-needed relief for borrowers, as it means that home loan interest rates will likely hold for now.

Currently, she said, “the average interest rate range we are seeing for residential loans is approximately between 5.5 and 6.5 per cent, depending on the product and your borrowing profile”.

“We are seeing fixed rates increase across the board. Depending on the lender, variable rates are currently slightly cheaper by 10 to 50 basis points, so we are seeing most clients opting to ride the storm with a variable structure,” Ms Unsal outlined.

For both buyers and refinancers, she went on, higher rates mean lower borrowing capacity.

“Banks generally assess your affordability with a 3 per cent buffer above the offered interest rate to ensure you can keep up with repayments.

“If you are thinking of purchasing soon, we recommend you get your pre-approval now, as many lenders will have an option to lock in your interest rate for three months while you search,” Ms Unsal advised.

“If you’re someone who tried to refinance but were told you didn’t service the new loan, two major lenders are now offering a reduced buffer at 1 per cent to give good borrowers greater flexibility.”

“Whilst this month is a welcome break, and there is no certainty of future cash rate movements, we anticipate a few more increases this year to help curb inflation back to its target range of 2 to 3 per cent,” she concluded.