labelCategory: RBA Cash Rate
The Reserve Bank of Australia (RBA) increased the cash rate to 4.35% for November 2023.
Why Did The RBA Increase The Cash Rate In November 2023?
In her statement on the RBA’s decision, Governor Michele Bullock said, “Inflation in Australia has passed its peak but is still too high and is proving more persistent than expected a few months ago. The latest reading on CPI inflation indicates that while goods price inflation has eased further, the prices of many services are continuing to rise briskly. While the central forecast is for CPI inflation to continue to decline, progress looks to be slower than earlier expected. CPI inflation is now expected to be around 3½ per cent by the end of 2024 and at the top of the target range of 2 to 3 per cent by the end of 2025. The Board judged an increase in interest rates was warranted today to be more assured that inflation would return to target in a reasonable timeframe.”
What Do Our Experts Say About The RBA’s Decision?
Home Loan Experts CEO Alan Hemmings said, “The Reserve Bank’s decision to raise the cash rate by 25 basis points, to 4.35%, was in line with expectations. Several factors, including rising fuel prices and the continuous surge in property prices and rents, have contributed to stubborn inflation. The Reserve Bank’s concern about this slow pace of inflation reduction prompted this rate hike as an attempt to expedite the process.
“Despite this increase, most economists now believe that this marks the end of the upward rate cycle, although it does not necessarily imply a prompt reduction in interest rates. Many experts speculate that the Reserve Bank may not consider lowering the cash rate until 2025, as it seeks to strike a balance between controlling inflation and preventing the property market from overheating.”
So what does this mean for you?
Hemmings explained, “For consumers, this additional rate hike underscores the importance of ensuring they can manage their mortgage payments. It is crucial to review living expenses, particularly discretionary spending. Existing customers with fixed-rate loans coming to an end or those uncertain about the competitiveness of their current variable interest rates should strongly consider consulting with a broker for guidance. For prospective homebuyers, this latest rate increase will likely impact the amount they can borrow; therefore, speaking with a broker to maximise their borrowing potential is essential.”
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.
You can use our repayment calculator to find out what your repayments should look like.