During the October monetary policy meeting, the Reserve Bank of Australia (RBA) opted to maintain the nation's official cash rate at 4.10%. In response to this decision, Mortgage Choice CEO Anthony Waldron offered his insights, stating that this was Michele Bullock's first meeting as the RBA's Governor and that it would likely be well received by borrowers and potential buyers as it allows for some financial relief.
The RBA's decision was reinforced by the latest Consumer Price Index (CPI) data from the Australian Bureau of Statistics (ABS), which showed a 5.2% increase in the 12 months to August 2023. However, it is worth noting that this is still below the peak of 8.4% seen in December 2022, and underlying inflation in August was lower than the previous month. Additionally, the ABS reported that the unemployment rate remained steady in August.
According to home loan submission data from Mortgage Choice, 98% of loans submitted by their brokers in September were for variable rate home loan products, highlighting a clear preference among borrowers. Meanwhile, only 2% of loans included a fixed component. The data also revealed a 7% increase in purchases and a 6% decrease in refinancing activity during September.
Mr Waldron elaborated on the data, stating that earlier this year, there was a significant surge in loans coming off fixed terms, and with a period of steady interest rates, there has been a noticeable slowdown in refinancing activity. He also acknowledged the influence of the busy Spring selling season, which has resulted in an increase in properties coming to the market and providing more opportunities for buyers.
In regards to national home prices, the PropTrack Home Price Index indicated a rise in September, with national prices now fully recovering from the decreases seen in 2022. Specifically, there was a 0.35% month-on-month increase, bringing prices to peak levels. Furthermore, current data shows a 4.31% rise in prices since the beginning of the year. All Australian capitals, except Darwin, experienced a climb in home prices during September.
Senior Economist from PropTrack Eleanor Creagh further analyzed the data and commented that despite the RBA's decision to increase interest rates by 400 basis points since May 2022, they have now opted to keep the cash rate steady at 4.10%. She also noted that a decline in economic activity, underlying inflation, and consumer spending have eased the pressure on the RBA to continue raising interest rates.
Ms. Creagh continued by stating that this decision will likely have a positive impact on buyer and seller confidence during the Spring selling season. Looking ahead, it is highly probable that interest rates have reached their peak, and with the current rebound in population growth and limited new home builds, home prices are expected to continue to rise, potentially setting new record levels.
Mr. Waldron concluded the discussion by emphasising the importance for borrowers who are set to roll off their fixed rates in the coming months to consult with their broker to ensure they are financially prepared for the change in their repayments. He further advised that with the Spring season well underway and the holiday period approaching, those wishing to purchase property before the end of the year should act quickly. Additionally, he urged caution for borrowers to be mindful of the potential impact of the upcoming September quarter CPI data, set to be released on October 25th.