On the first Tuesday of every month, the RBA sits down for a meeting in which they decide what to do with the official interest rate. This month, they have kept it stable at 4.35%, a move that mirrors their decisions since November last year.
It’s a welcome few months of stability after we saw a record-breaking 13-month run of increases in 2022-23. Now the question we’re all asking is when will we see a decrease in the rate? A move like that would be a welcome relief to cash-strapped mortgage holders and possibly see an increase in the borrowing capacity of buyers and investors.
Well, given the recent stance of RBA Governor Michelle Bullock, we may have to wait a few more months for that. More on that further below.
The Inflation Scenario
The holding steady of the cash rate this month was widely anticipated. In fact, given inflation had seen a recent surge there was some fear that we may even see a return to rate rises. But, the Consumer Price Index rose by only 1% in the June 2024 quarter, which was lower than expected and poured water on talks of a rate rise.
*A quick definition*:
The Consumer Price Index, or CPI, is a measure of the average change over time in the prices paid by households for a fixed basket of goods and services. It’s one of the most popular measures of inflation and deflation.
The 1% increase of the CPI brings annual inflation to a growth of 3.8%. This last quarter seesa first annualised increase since December 2022, which shows we’re not out of the woods with inflation just yet.
Plus, we’re still above the RBA’s goal of getting inflation back into the 2-3% range.
What does this mean for our rates in the near future?
When Will We See Rate Cuts?
According to PropTrack senior economist Paul Ryan, the next move we’ll likely see in interest rates will be down. The question is, when?
You see, the trimmed mean inflation rate, which doesn’t include the volatile top and bottom 15% of price changes, has decreased since last quarter. According to ABS Head of Prices Statistics Michelle Marquardt, “This is the sixth quarter in a row of lower annual trimmed mean inflation, down from the peak of 6.8% in the December 2022 quarter.”
As this is the preferred rate the RBA uses, you can see why the talk about rate cuts isn’t going away.
Don’t get too excited though – here’s what Michelle Bullock has to say about it:
“A near-term reduction in the cash rate doesn’t align with the board’s current thinking,” she said. I understand this is not what people want to hear. The board’s feeling is that in the near term — by the end of the year and the next six months — that doesn’t align with their thinking about interest rate reductions at the moment.”
It looks like we’ll be enjoying stable rates until the end of the year, before we hopefully start to see rate cuts next year, provided inflation stays on the right path.
What the RBA is saying also aligns with the outlook of many economists and bankers. Bendigo Bank Chief economist David Robertson, said:
“We see no move (up or down) in 2024, but a series of RBA cuts in 2025. The [quarterly] data aligns with our opinion that restrictive interest rates are helping to moderate inflation, but the frustratingly slow pace of moderation means the RBA may not be in a position to cut rates until May 2025.”
Looks like we’ll be holding steady into the new year at least.
What Happens to the Housing Market When Interest Rates Decrease?
Traditionally, a decrease in the interest rate brings more buyers to the market, increasing demand and putting upward pressure on property prices.
The Australian property market, in particular Brisbane, has seen strong gains for many months now, and it’s not showing signs of slowing down as we head into what is normally a busy Spring season.
My point is, I wouldn’t expect the recent decision of the RBA to hold rates steady to have much impact on property prices.
When is the Right Time to Sell My House?
At The Henry Wong Team®, we always say that the right time to sell your house is the time that suits you. Don’t wait to try and time the market perfectly, instead, base your decision around your family, your work, and your own path. You’ll know when the time is right to open a new chapter.
You want a good real estate agent on your side when that time comes. Me and my team sell property all over Brisbane, and have become known as auction experts, with an impressive clearance rate and some record-breaking auctions behind us, including this recent one in Wishart.
If you’d like us to get similar results for the sale of your home, or even if you just have real estate questions you want answered, we’re here for you. Get in touch today!
