The Reserve Bank has kept interest rates unchanged for two months in a row, although the option to hike again remains up its sleeve if needed.
In a move welcomed by stretched borrowers, the central bank kept interest rates steady at 4.1 per cent.
The decision was likely a close one, with the RBA governor’s statement keeping in a reference to more tightening if needed.
However, Philip Lowe’s comments were interpreted as slightly less assertive by many economists, with some entertaining the idea the cash rate has peaked.
For mortgage holders, the possibility of a central bank at, or very near, the end of its hiking cycle will be a relief.
Following the 400 basis points of tightening already, RateCity analysis has the average borrower with a $500,000 mortgage sinking more than $1100 extra into their loan each month compared with what they were paying before interest rates started going up.
The firm’s research director, Sally Tindall, said most variable borrowers had not yet paid for rate hike number 12 doled out in June due to the lag time between cash rate movements and money coming out of bank accounts.
Ms Tindall urged borrowers to hunt around for a better deal if they were struggling.
Variable rate mortgage holders should be looking for a rate under 5.75 per cent, with a handful of lesser-known lenders offering rates below 5.5 per cent.
“That’s a far cry from what the big four banks are currently offering new customers,” Ms Tindall said.
By refinancing to one of the lowest rates, borrowers could save nearly $12,500 over two years rather than sticking with the least competitive option.
The latest lending data, released by the national statistics bureau on Tuesday, showed refinancing rates dipping slightly but remaining elevated as borrowers continue to switch lenders in search of better deals.
While there could be more interest rate hikes to come, the economy is already showing signs of slowing down.
An index measuring movements in activity levels in Australia’s industrial sector recorded its 15th straight month in contractionary territory.
The Ai Group Australian Industry Index sunk another 2.8 points to be 14.7 points below the neutral level.
Chief executive of the national employer association, Innes Willox, said manufacturers were reporting pandemic-era conditions and the construction industry was still battling structural issues.
“Australia’s economic slowdown has squarely hit industry,” Mr Willox said.
Measures of new orders, employment and sales all dropped off in July, while firms kept reporting rising costs even as the official inflation numbers were starting to cool.
“Of particular concern are wages, which are rising at a record pace while industry faces the threat of contractionary conditions,” he said.
Poppy Johnston
(Australian Associated Press)
