Cash rate expected to stay on hold in September

The majority of experts believe that the Reserve Bank of Australia (RBA) will hold the cash rate in September and that the rates have already peaked.

According to this month’s Finder RBA Cash Rate Survey, which takes into account the opinions of 38 experts and economists, two-third of experts said the cash rate had hit its apex in the current rate rise cycle and they forecast the cash rate peak has now decreased slightly from an average of 4.4% to 4.2%.

This would mean, according to Graham Cooke, head of consumer research at Finder, that homeowners will likely be let off the hook for the third consecutive month.

“The cost of living crisis has put an end to the post COVID spending splurge, giving the experts reason to believe that the RBA will hold off on increasing the cash rate,” he said.

“This will be music to the ears of mortgage holders still reeling from the last 11 rises.”

But, he stressed, despite a growing sentiment that the cash rate had peaked, mortgage holders would need to remain on guard.

“Escalation in Ukraine, continued slowdown in China or a change in inflation could see the RBA lifting in the coming months,” Cooke said.

At the same time, 27% of Australian did not believe they would ever be able to afford a home while three quarters of the panel believed that the policy, including spending more than $3 billion in incentives to state governments to build 1.2 million new homes, will actually boost housing supply.

Following this, more than four in five experts who weighed in (82%, 23/28) did not believe the government should assist these people in refinancing to a lower rate.

According to panellists, this would give the wrong incentives to both lenders and borrowers.

“The real interest rate is still negative, so borrowers are paid to borrow. Why should the tax-payer pay for imprudent decisions by house owners and lenders?,” Jakob Madsen from University of Western Australia said.