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RBA holds interest rates but banks' new 'battleground' could benefit borrowers

The RBA has left the cash rate steady at 4.35 per cent at its February meeting.

The Reserve Bank (RBA) has left the cash rate on hold but, with the anticipation of cuts this year, banks are entering a new “battleground” for mortgage holders.

Interest rates have skyrocketed from a record low of 0.10 per cent to 4.35 per cent since May 2022, adding $1,399 per month to repayments on the average $624,387 mortgage with a 6.23 per cent interest rate.

While interest rate cuts aren’t expected until the second half of the year, a number of Aussie banks have already started cutting their fixed interest rates in preparation and have slashed some by up to 0.80 per cent.

RBA governor Michele Bullock and interest rate decision
The RBA kept the cash rate steady at 4.35 per cent today. (Source: Yahoo Finance/Getty/AAP)

Are you dealing with rising repayments? Contact to share your story

Resolve Finance managing director Don Crellin said this trend was expected to continue as the market anticipated a cash rate cut, which would be good news for mortgage holders.


“Rates will be the battleground for new customers,” Crellin told Yahoo Finance. “Banks will continue to focus on market share, so expect the banks to get very competitive. Whether it's fixed or variable, changes are on the horizon as lenders jockey for position."


Finder head of consumer research Graham Cooke said the attitude of banks had “certainly shifted”.

“If your rate doesn’t start with a 5, it may be time to consider your refinancing options,” Cooke said.

While Crellin doesn’t foresee a “mad rush” into fixed rates, he said the advantage of locking in your rate was securing predictable repayments.

“This is a smart move for those wanting certainty,” he said. “However, in a falling rate environment, the advantage diminishes. It's a balancing act between repayment certainty and accessing potentially lower rates.”

Crellin urged consumers not to “set and forget” their home loan and to make sure they were paying close attention to product features.

Inflation moderating but 'remains high'

Speaking about the decision, the RBA board said inflation was continuing to moderate but "remains high".

The annual rate of inflation dropped to 4.1 per cent in the December quarter, down from 5.4 per cent in the previous quarter. The central bank’s inflation target is 2-3 per cent.

The board said goods price inflation was lower than the RBA's November forecasts, but services price inflation declined more gradually and remained high.

"While there are encouraging signs, the economic outlook is uncertain and the board remains highly attentive to inflation risks," the board said.

"The central forecasts are for inflation to return to the target range of 2–3 per cent in 2025, and to the midpoint in 2026."

The board also noted "a further increase in interest rates cannot be ruled out" and it would pay close attention to the data.

When will interest rates go down?

The Big Four Banks’ economic teams are currently expecting cash rate cuts in the second half of the year. But the timing and amount of cuts varies.

Big Four banks’ predictions:

  • CBA: Three cuts in 2024 with the first in September

  • Westpac: Two cuts in 2024 with the first in September

  • NAB: One cut in 2024 in November

  • ANZ: One cut in 2024 in the fourth quarter

However, some experts have warned the major banks may not pass on any cash rate cuts in full to mortgage holders.

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