Rate reprieve: Reserve Bank holds cash rate at 3.60%

Australian homeowners with a mortgage can breathe their first sigh of relief in 11 months following the Reserve Bank board's decision to maintain the cash rate at 3.60% at this afternoon's monthly meeting.

The pause brings to an end a record streak of ten consecutive interest rate hikes handed down by the central bank which has pushed the cash rate up by 350 basis points from an historic low of 0.10% back in May 2022.

In his post-meeting statement, RBA governor Philip Lowe acknowledged that the impact of the central banks' recent series of rate increases was likely lagging and yet to be fully 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."

While mortgage holders have likely been spared further increases to their home loan rates and repayments over the next month, they might not be out of the woods quite yet though.

With inflation still sitting well above the Reserve Bank's target range of 2-3%, Lowe's post-meeting commentary left the door open for further action in the period ahead.

"The Board expects that some further tightening of monetary policy may well be needed to ensure that inflation returns to target.

"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."

Any potential rate increase when the board next meets on May 2 could depend on the outcome of the next major tranche of inflation data, which will come via the Australian Bureau of Statistics' (ABS) Consumer Price Index for the March quarter, due out on April 26.

Borrowers seek greener pastures

Now that the RBA has stayed its hand there will be pressure on lenders to follow suit and provide home loan customers with a reprieve from the rate increases many have endured over the past year.

Homeowners with an average-sized 30-year loan, for instance, are likely to have seen the cost of their mortgage repayments rise by $12,000 annually as a result of the previous ten rate hikes, comparison website Finder calculates.

Given those considerable repayment increases, it's hardly a surprise then that many borrowers have been shopping around for better deals, and will likely continue to do so even after this rate pause.

An analysis of Google search data conducted by Compare The Market has revealed that search volumes associated with refinancing have skyrocketed in the last year, with the five most common refinancing-related searches (e.g. home loan comparison) up 163% between February 2022 and 2023.

This search trend is supported by refinancing figures from the ABS itself. In February alone, owner occupiers and investors switched $19.9 billion worth of home loans to another lender, which is the highest amount ever recorded.

Stephen Zeller, the general manager of money at Compare the Market, says that this recent refinancing spike isn't just about people trying to engineer a cut in their repayments by moving to a loan with a lower rate, but also borrowers taking advantage of the numerous cashback offers on the market - many of which are in the $2000 to $4000 range.

"Aussie borrowers aren't silly. They're shopping around for the best rates and cashback offers - people aren't sticking around to get slapped with higher prices with their current lender."

It's not just variable-rate customers that will be looking to switch either. With plenty of fixed-rate borrowers set to come off their existing rates in the coming months, Zeller is urging anyone in that position to start assessing their options.

"There's roughly $350 billion worth of fixed-rate loans due to roll off this year - these borrowers are desperate to refinance to the best rate available after paying a low-interest record rate for the last year or so," he says.

"They should be scouring for the most competitive rates available at least a month or so beforehand and potentially look at refinancing with a settlement date that coincides with when their rate expires."

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