labelCategory: RBA Cash Rate
The Reserve Bank of Australia (RBA) held the cash rate at 3.60%
How Does The Cash Rate Affect My Interest Rate?
Lenders add a margin to the official cash rate to determine the variable interest rate they offer to customers. So if you have a variable interest rate, it will almost certainly go up with a cash rate increase.
But this month the cash rate held, so what does that mean? The most likely scenario is little to no change in interest rates. Previously, when the cash rate held at a historical low of 0.1%, lenders did not change their interest rates.
You can use our repayment calculator to find out what your repayments should look like.
Why Did The RBA Hold The Cash Rate In April 2023?
In his statement on the RBA’s decision, Governor Dr Philip Lowe said, “The board recognises that monetary policy operates with a lag and that the full effect of this substantial increase in interest rates is yet to be felt. The board took the decision to hold interest rates steady this month to provide additional time to assess the impact of the increase in interest rates to date and the economic outlook.
“The decision to hold interest rates steady this month provides the board with more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty. In assessing when and how much further interest rates need to increase, the board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market. “
What Do Our Experts Have To Say About The RBA’s Decision?
Home Loan Experts founder Otto Dargan said it was a prudent decision by the RBA to hold interest rates this month. “After 350 basis points of rate rises, it’s time to take a break and wait to see how this affects the economy,” Dargan said “Inflation has started falling, many borrowers are coming off fixed rates soon and some overseas banks have collapsed. Increasing rates this month would risk overshooting, causing unnecessary financial distress for borrowers.
“Borrowers should be cautious, however, as this decision doesn’t mean the RBA won’t increase rates again later. The RBA will be looking at employment, retail sales and inflation to determine if the cash rate is at an appropriate level.”
Adding to that, Home Loan Experts CEO Alan Hemmings said, “After 12 months of continuous rate increases, the Reserve Bank’s decision to hold off raising the cash rate further is finally bringing some relief for borrowers. There are concerns the Reserve Bank has gone too far too quickly, particularly since there are still many fixed-rate customers whose fixed term will expire over the next couple of months; their interest rates and repayments will increase by nearly 3.5 percentage points. This may not be the end of the rising cash rate cycle but indications are we are closer to the peak. Once we see a couple of months of stability and customers getting used to making the higher repayments, we may see a little competition back in the property market. An added advantage of the stability is that customers will also have a clearer picture of how much they can borrow.”
Finally, Home Loan Experts General Manager Bhisan Raj KC said, “Whilst inflation is still high, it has fallen slightly recently, which must have helped the RBA make this decision. It will be a relief for many borrowers. A homeowner with a $500K loan has already seen an increase of $1,000 in their monthly repayment. This will help borrowers relax a bit. It also gives confidence to new borrowers and with the population growth expected via immigration, this will boost the confidence of investors and people coming to Australia.”