RBA UPDATE – JUNE 2023

RBA UPDATE | Effective June 7, 2023

The Reserve Bank of Australia (RBA) decided to increase the official cash rate by a further 25 basis points to 4.10%.

According to CoreLogic’s recent findings in their Hedonic Home Value Index (June 2023), economists are very much divided on whether or not we have moved through the peak in cash rate hikes, and as the number of mortgage holders come off their fixed terms, there is high potential for increased mortgage stress.

If you have mortgage concerns, speaking with a mortgage broker or trusted finance professional and proactively addressing these worries, can help minimise the severity of mortgage stress.

The Reserve Bank of Australia (RBA) decided to increase the official cash rate by a further 25 basis points to 4.10%. Whilst Dr. Philip Lowe, Governor of the RBA believes that Australia’s inflation rate has passed its peak, he said that 7% is still too far away from the 2-3% target range. Expanding on this Dr. Lowe stated, “This further increase in interest rates is to provide greater confidence that inflation will return to target within a reasonable timeframe.” While further tightening of monetary policy may be required to achieve this, it will all depend on how the economy and inflation evolve. “The Board remains alert to the risk that expectations of ongoing high inflation contribute to larger increases in both prices and wages,” Dr. Lowe stated.

According to CoreLogic’s recent findings in their Hedonic Home Value Index (June 2023), economists are very much divided on the cash rate outlook and whether or not we have moved through the peak in cash rate hikes. CoreLogic’s Research Director, Tim Lawless, is concerned about the potential for increased mortgage stress. “The coming months will see a sharp rise in the number of fixed rate home loans reaching term. As more borrowers refinance, we should get a better understanding of how well borrowers are placed to service their debt at a substantially higher interest rate,” Mr. Lawless said. “It would be naïve to think mortgage arrears won’t rise through the second half of the year, however a material lift in motivated sellers seems unlikely.”

If you have mortgage concerns, speaking with a mortgage broker or trusted finance professional and proactively addressing these worries, can help minimise the severity of mortgage stress.

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