Borrowers to be spared a Christmas interest rate hike

This week’s lower-than-expected inflation number is shaping up as an early Christmas present for borrowers, with the Reserve Bank of Australia (RBA) set to keep interest rates on hold at its December 5 board meeting, according to the experts.

According to Finder, 82 per cent of property experts believe the RBA will leave the official cash rate at 4.35 per cent – with just 18 per cent expecting a hike this month.

While 54 per cent of the experts also said the cash rate has already peaked.

However, 46 per cent said another rate rise is yet to come. 

Head of Consumer Research at Finder, Graham Cooke said a cash rate hold would be welcome news to cash-strapped mortgage holders. 

The RBA was threatening to pull the presents from under the Christmas tree for many homeowners, but falling inflation means they can breathe a quiet sigh of relief,” Mr Cooke said.

“Inflation is the one number the RBA is most heavily influenced by, so this downward trend is great to see. 

“Aussies with a home loan can now look forward to two months of certainty, as the RBA does not make a decision in January – and can only make eight cash rate changes next year.”

AMP Chief Economist, Shane Oliver, said the slowdown in inflation meant the RBA had room to pause. 

“While recent RBA commentary has been hawkish it lacks the sense of urgency seen prior to the November meeting and since then we have seen softer data for retail sales, home prices and inflation so there is no “smoking gun” to justify another hike,” Mr Oliver said.

Moody’s Analytics Economist, Harry Murphy Cruise, said the lower-than-expected October print was an early Christmas present for households and businesses. 

“Combined with the monthly fall in retail sales through October, it is clear that higher interest rates are quelling demand and, by extension, inflation,” Mr Murphy Cruise said.

“That should be enough to save the Reserve Bank Board from having to be the Grinch of Christmas when it meets next week.”

However, Oxford Economics Australia Head of Macroeconomic Forecasting, Sean Langcake, said the Q3 CPI data raised enough concerns about inflation for the RBA to reluctantly resume the hiking cycle and tipped they would increase the official cash rate again.

“We don’t see a single hike as being enough to allay their concerns given the breadth of underlying inflation pressures,” Mr Langcake said.

“The board could wait until February for another CPI print. 

“But they would be better off cracking on with the job in December.”

Mr Cooke said despite an expected rate hold in December, homeowners aren’t out of the woods. 

“If inflation doesn’t continue to ease, we are looking at another rate rise early next year,” he said.

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Rowan Crosby

Rowan Crosby is a freelance journalist specialising in finance and real estate.