As we step into November, Australia’s economic landscape is brimming with mixed signals, particularly when it comes to interest rates. The Reserve Bank of Australia (RBA) has been keeping a close eye on inflation and employment, and their decisions are having ripple effects across the housing and mortgage markets. Here’s a look at where things stand and what it means for home buyers and investors.
Employment Strength Holding Steady
Australia’s employment market continues to show resilience, with employment up by 3.1% over the past year. The total employment rate now sits at 67.2%, a solid figure that reflects the economy’s robust performance. This improved labour market is an essential factor in the RBA’s recent decision-making. It indicates that economic conditions remain strong enough to withstand current interest rate levels, as more Australians are working and contributing to household spending and savings.
RBA Holds Rates Steady Despite Inflation Concerns
On November 5th, the RBA announced that the cash rate would remain at 4.35%. While inflation is indeed showing signs of slowing, the RBA emphasised that it is still too high for comfort. The RBA aims to keep monetary policy “sufficiently restrictive” to ensure that inflation continues its downward trend.
In short, the RBA is choosing to hold firm rather than make any hasty rate cuts, given the relatively healthy employment figures and ongoing concerns about inflationary pressures.
What Does This Mean for Future Rate Cuts?
Looking ahead, there’s some optimism for those hoping for relief. As outlined in our previous “When will Interest Rates go down?” article, Economists from the major Australian banks expect that the RBA could start lowering interest rates in early 2025. As of now, February 2025 is shaping up to be the anticipated timeline. These forecasts are based on expectations that inflation will ease further, eventually giving the RBA the green light to adjust rates without risking economic stability.
“If inflation continues on its current downward trend, we could see rate cuts by early 2025, providing much-needed relief to borrowers,” says Scott Thornton, Mortgage Broker & Director at Loan Monster.
The Balancing Act: Waiting for Inflation to Decrease
One critical aspect of the current situation is that the RBA is waiting for inflation to cool down naturally, rather than cutting rates in response to any economic downturn. With strong employment figures, there’s less urgency to adjust rates due to economic weakness. Instead, the RBA is prioritising a steady, measured approach to ensure that inflation comes down to its target range without stoking new concerns.
How This Affects Homeowners and Buyers
For current and prospective homeowners, the wait for lower interest rates continues. With rates remaining steady at 4.35% for now, mortgage repayments will stay elevated. However, if you’re planning a home purchase or getting a low refinance rate, keeping an eye on economic trends is crucial. February 2025 could bring some relief, but it’s essential to prepare for any scenario, especially as the RBA keeps a close watch on inflation.
“While a potential rate cut in early 2025 offers hope, it’s wise not to bank on it just yet. We always say to clients, staying flexible and planning for both short-term challenges and long-term gains will put you in the best position,” says Andrew Siegert, Mortgage Broker & Director at Loan Monster.
Summarising
The RBA’s decision to maintain the current interest rate reflects a cautious approach to balancing inflation and economic growth.
While the employment market remains strong, the wait for inflation to fall continues to dictate the pace of future rate adjustments and homeowners’ abilities to refinance their mortgage at a lower rate. Stay informed and work closely with your mortgage broker to navigate these evolving conditions.
At Loan Monster, we’re here to guide you through every step, helping you make the most of the current landscape while preparing for potential changes ahead.
Keep checking in for the latest updates—we’ll be monitoring the situation closely and are ready to assist you with tailored mortgage solutions as the market evolves.
