Relief at last! RBA holds steady for April with no cash rate hike

In an announcement made to the cheers of mortgage-stressed homeowners, the Reserve Bank of Australia has, at last, paused its crusade against inflation, leaving the cash rate at 3.60%. 

This marks the first time the RBA hasn’t lifted official interest rates in nearly a year. While inflation remains well over its target band of 2% - 3%, the central bank saw enough signs of contraction in the economy to use a steady hand instead of the monetary hammer – at least for now. 

In a statement to the press, RBA governor Philip Lowe reiterated that slowing down inflation remains the top priority, but gentled his language around how hard and high rates will go. 

"A range of information, including the monthly CPI indicator, suggests that inflation has peaked in Australia," explained Lowe.

"Growth in the Australian economy has slowed, with growth over the next couple of years expected to be below trend. There is further evidence that the combination of higher interest rates, cost-of-living pressures and a decline in housing prices is leading to a substantial slowing in household spending. While some households have substantial savings buffers, others are experiencing a painful squeeze on their finances."

The question remains whether today’s decision will be the last for the tightening cycle, or if there is still further to go.

Today’s decision will likely relieve borrowers, whose mortgages have been hammered by a steady beat of interest rises. However, with inflation still much too high, we shouldn’t celebrate too soon.

Indeed, Mozo banking expert Peter Marshall warns that a break doesn’t mean ‘no more rate rises’ for the year. 

“I think we’re either at – or very close to – the peak of the cash rate,” Marshall explains. “There might be one increase left. I can’t see them being long.”

Instead, it’s more likely the RBA will wait to see how effective the current course has been. If the economy continues to cool down, the central bank may leave things as they are. If not, the RBA may give the cash rate one more nudge. 

"The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target," said RBA governor Philip Lowe.

"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."

Latest estimates from the Big Four Banks – CBA, Westpac, ANZ, and NAB – point toward a final rate hike in May or June, lifting the cash rate peak to 3.85%. 

But for now, borrowers struggling with their monthly repayments can sit tight.

Evidence mounts that property prices may have reached their nadir. After plummeting -8.4% in the year to January 2023, many analysts suspect first-home buyers have been too leery of steep mortgage rates to buy in, while sellers have avoided hitting the market with properties doomed to make small profits. 

However, if the cash rate holds steady for long enough, home-hungry buyers may sense an opportunity and reheat the market. 

“There are people desperate to buy houses,” explains Marshall. “As soon as people get the confidence that the RBA is done – or pretty much done – with increasing rates, it’s all going to take off again and will go like a rocket.”

Some lenders have even begun ticking down fixed rates on their home loan offers, which have proved a reliable bellwether for where banks suspect the economy is headed. While one to three-year terms remain lofty, four and five-year terms have seen more meaningful cuts.

Marshall says this indicates lenders expect another six to twelve months of high interest rates – then long-term, things will calm down. 

“How banks make money is to beat consumers fixing as an investment,” Marshall surmises. “That’s their whole business.”

So while prices are low, now may be the ideal time to leap on a property if you can.

Banks will likely leave home loan offers as is throughout April, as the cash rate hasn’t put any more pressure on their funding costs.

However, we’ll still track which lenders have changed rates as word comes in. To see how your lender compares, visit our home loan comparison page.