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RBA holds interest rates giving Aussies much-needed relief

The official cash rate has kept steady at 4.1 per cent.

RBA governor Philip Lowe and money. RBA interest rate decision.
The RBA has kept the official cash rate on hold at 4.1 per cent in August. (Source: Getty)

Aussie mortgage holders can breathe a sigh of relief, with the Reserve Bank of Australia (RBA) opting to hold the cash rate steady - at 4.1 per cent - for another month.

RBA governor Philip Lowe said higher interest rates were working to bring down inflation but he did not rule out further interest rate hikes down the track.

"Inflation in Australia is declining but is still too high at 6 per cent. Goods price inflation has eased, but the prices of many services are rising briskly. Rent inflation is also elevated," Lowe said.

"The central forecast is for CPI inflation to continue to decline, to be around 3.25 per cent by the end of 2024 and to be back within the 2–3 per cent target range in late 2025."

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Lowe noted the Australian economy was experiencing a period of "below-trend" growth and this was expected to continue for awhile. Conditions in the labour market had eased, but remained very tight.

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon the data and the evolving assessment of risks," he said.

Breathing room

Finder money expert Richard Whitten said the decision gave homeowners some much-needed breathing room.

“Today's hold is welcome news for borrowers who have been bracing themselves for another hike,” Whitten said.

“Inflation is slowing down, which suggests that previous rate hikes are working.”

But Aussies are still feeling the pinch from the RBA’s 12 previous interest rate hikes. Monthly home loan repayments have risen by an estimated $1,217 per month on a $500,000 loan over a 30 years since the current rate-hiking cycle began last year, according to Canstar research.

Repayments have increased $1,826 for those with a $750,000 loan and $2,435 for those with a $1 million loan since the May 2022 rate hike.

Is this the end of the RBA’s rate hikes?

Three-quarters of the experts who took part in Finder’s RBA cash rate survey believed the cash rate would peak between July and September this year.

But this might not be the end, with the panel forecasting the average cash rate to peak at 4.4 per cent.

NAB correctly predicted the RBA would hold interest rates this month, but said there was the potential for one or two more hikes in the coming months.

ANZ also predicted the RBA would pause interest rates and was expecting one 0.25 per cent cut in the fourth quarter of 2024 to bring the cash rate down to 3.85 per cent by December 2024.

CBA and Westpac both forecast the RBA would hike rates by 0.25 per cent today.

Compare Club head of research Kate Browne said it's unlikely mortgage holders are out of the woods just yet.

"If you have a mortgage make sure you are getting the best possible rate you can, even a few percentage points can make a huge difference to your repayments," Browne said.

"While it seems like we keep saying this, our research shows that only 30 per cent of Australians have taken action to save on household expenses by switching lenders or providers."

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