Mortgage holders are bracing for the next decision from the Reserve Bank of Australia (RBA) to be handed down later today as experts remain split on what will happen.
Economists are divided over whether Australia’s central bank will give homeowners a much-needed reprieve by pausing the rate rise or if it will be the 11th consecutive month the rate will jump.
For the first time in a year, Australia’s inflation rate has dropped slightly, buoying hopes of a pause.
But in a bad sign, a recent Finder survey from a panel of experts found that the overwhelming majority think a rate rise is still imminent for April.
Two thirds of the panel – 26 out of the 42 participants, forecast another rate hike on Tuesday.
They expect the rate to rise by 25 basis points. This would increase the monthly repayments of an average home loan of $601,00 on a variable rate by $1191.
Homeowners have been slammed with 10 consecutive interest rate rises since May last year.
The current rate is 3.6 per cent, up a staggering amount since its historic pandemic low of 0.1 per cent.
The RBA will release their latest decision at 2.30pm today.
The big four banks are also equally split.
For April, CBA and Westpac are both believers of the pause.
They think this month will be a pause, and next month the rate will rise again.
Meanwhile, the chief economists at NAB and ANZ have forecast another 0.25 per cent rate rise.
A report released last month has made economists think the RBA’s strategy is working, making an interest rate rise for this month unnecessary.
The Australian Bureau of Statistics put out a report for February, released March 16, which found that inflation has reduced.
The current figure is 6.8 per cent for the 12 months to February, down considerably since January’s stark 7.4 per cent rate of inflation, suggesting the RBA’s aggressive rate rise regime may be working as intended.
James Algar, from Mortgage Choice, is adamant the RBA will pause.
“I think it’ll be a pause,” Mr Algar told news.com.au.
“I heard yesterday saying there might be a cut, I don’t subscribe to that.
“The pause will feel like a cut in terms of sentiment in the market, which is dangerous.”
And if Australia’s central bank did raise rates, he said it wouldn’t be by much.
“At best if it’s an increase it’ll be a small one,” he added.
As a piece of anecdotal evidence for the market’s sentiment, Mr Algar was at a conference last week with 28 mortgage brokers.
They asked for a show of hands about who thought there would be a rate cut, a pause or a hike.
“Out of 28 people, 25 were a pause, the rest were undecided or at the bar buying drinks. The general feeling is it’s a pause,” he explained.
AMP’s chief economist Shane Oliver also suggests a hold on rates next month is likely.
“The bigger than expected fall in the February CPI Indicator provides more evidence inflation has peaked and is now slowing,” wrote Mr Oliver on Twitter on Thursday, following the release of the CPI data.
“Along with falling real retail sales, mixed (business) conditions, signs of a slowing jobs (market) and global banking turmoil it supports the case for the RBA to pause next (week).”
Head of Australian Economics with Commonwealth Bank’s research division, Gareth Aird, believes the RBA will keep the rate on hold, but it will be “a very close call.”
“Reading between the lines, it is clear that the RBA would like to pause the tightening cycle,” said Mr Aird, “but the Board wants to see sufficient evidence in the domestic economic data that demand is cooling.
“But the domestic data that the RBA said they were monitoring over the past month has not made the case to pause in April an obvious choice.
– With NCA Newswire
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