May RBA Decision: Cash rate unchanged

  • Official Cash rate remains at 4.75%
  • Uncertainty abroad and Japan disaster cited
  • Recent CPI spike to settle within target

The Reserve Bank of Australia announced today that it will be keeping the cash rate steady at 4.75% despite rising inflation.

The RBA’s decision is aligned with the ongoing strategy of strengthening the Aussie economy on the back of the recent local and regional natural disasters. Uncertainty in the EU as well as a levelling-out of employment growth were quoted by RBA Governor, Glenn Stevens as being “accommodative” to today’s decision.

But despite the interest rate freeze, many economists expect the cash rate increase in the near future.

According to Paul Bloxham, a former Reserve Bank economist, last week's CPI numbers were “the beginning of the upward swing of inflation”, and we should expect the cash rate to increase around the start of the third quarter.
“We expect that the next rate rise will be in July or August and that we’ll get another 50 basis points this year, by the end of this year,” he said.

Make a preemptive strike against the coming rate rise

With many economists expecting imminent increases in the cash rate, some of you are probably suffering from mortgage stress. If so, then now might be a great time to compare home loans, and perhaps make a switch.
Switching from the Big Four Banks could save you as much as a full 1 percentage of interest. For the average $285,000 loan (based on ABS data) over 25 years, that's $184 per month, or $55,226 over the life of the loan.

Read last month's Reserve Bank interest rates update.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate, loan amount and term entered. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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