Compare the Market’s Economic Director, David Koch, believes the Reserve Bank of Australia (RBA) will take a cautious approach following unexpected inflation data, potentially delaying further rate relief until later in the year.
Recent monthly Consumer Price Index (CPI) data showed headline inflation rose to 3 per cent, higher than the anticipated 2.9 per cent, creating uncertainty around the RBA’s next move.
“While this is only a monthly figure, I wouldn’t be hedging any bets that we’ll see rate relief at September’s board meeting,” Mr Koch said.
“The RBA will no doubt be taking a ‘better to be safe than sorry’ approach here.”
The RBA has already implemented three rate cuts this year in February, May, and August, each time reducing rates by 0.25 per cent.
The most recent cut in August brought the cash rate down to 3.60 per cent, providing mortgage holders with a $660,000 loan approximately $105 in monthly savings.
Despite the potential hold in September, experts still anticipate further rate reductions before the end of the year, with November being a possibility if economic conditions remain favourable.
“They’re walking a tightrope right now, balancing between lowering rates to help homeowners who have been hammered over the past few years and preventing inflation from creeping back outside the target range,” Mr Koch said.
The central bank will be closely monitoring quarterly inflation data released in October to determine the timing of any future rate cuts.
Key factors under observation include employment rates and export demand, though global economic uncertainty continues to complicate the outlook.
For borrowers unwilling to wait for official rate cuts, there are alternative options to reduce mortgage costs.
Major banks including Commonwealth Bank and Westpac have begun offering fixed rates starting with a four, while many variable rates remain in the mid-five per cent range.
Refinancing presents another opportunity for savings, with some banks offering substantial cashback incentives to attract new customers.
Compare the Market analysis reveals potential differences of up to 0.48 per cent between advertised rates.
This rate differential could translate to significant savings for homeowners.
“That difference could represent a saving of $201 on monthly repayments – or $2412 annually – for someone with an average loan of $660,000,” Mr Koch said.
Borrowers seeking immediate relief may need to be proactive rather than waiting for the RBA’s next move.
While fixed-rate contracts provide payment certainty, they may prevent borrowers from benefiting if rates decrease further.
“The RBA is taking a slow and steady approach to this rate cycle,” Mr Koch said.
“But the good news is there are things you can do to reduce your rate in the meantime.”
“The best rates might not be with your current lender, but a tiny bit of effort could leave a lot of money in your pocket.”
