Market Update: December 2023 – A pause and welcome break from the RBA to close out the year.

We are relieved with the recent news that the RBA have held the cash rate at 4.35% at its last meeting of 2023.

We are relieved to announce in this last Market Update for 2023, that the RBA have held the cash rate at 4.35% at its last meeting of the calendar year. This provides some comfort for our borrowers over the holiday season, where our budgets and bellies are stretched a little further from our usual habits.  The RBA won’t meet again until February 2024, which now gives us all a chance to break away from this news cycle for a short period of time.

A familiar cautionary message has been sent by RBA Governor Michelle Bullock; in that they won’t rule out further increases to the cash rate until inflation returns to their target range of 2-3%. The swift decline in annual inflation toward the backend of 2023 does signal that we are on track to reach that target, but the foot won’t eased off the gas in the short term before the finish line is in sight. Three of the top four banks are positively predicting that the cash rate has finally peaked, and the effect of the preceding 13 hikes has washed through the economy.

  • CBA: Peak of 4.35% in November 2023, then dropping to 2.85% by June 2025
  • Westpac: Peak of 4.35% in November 2023, then dropping to 2.85% by December 2025
  • NAB: Peak of 4.60% by February 2024, then dropping to 3.10% by March 2026
  • ANZ: Peak of 4.35% in November 2023, then dropping to 3.35% by June 2025

A gradual reduction in rates should be on track for the 3rd quarter of 2024, so we should be prepared to keep our budgets tight until then. Federal Treasurer, Jim Chalmers, is encouraged by the outlook; “we are making some welcome progress in the fight against inflation and that will determine the future directory trajectory of interest rates”.

Refinancing business has somewhat slowed, with the removal of most cash backs and a shortage of attractive fixed rates. With many variable home loan customers having addressed their interest rate over the past 12 months, the net cost benefit may be harder to establish. However, if you haven’t reviewed your loan over that time, substantial savings may be attainable, especially for customers with loan balances greater than $150,000.

Property prices are expected to climb further at a slower pace, due to a shortage of new home builds and a rising rental market. PropTrack Senior Economist Eleanor Creagh, stated that “together with a shortage of new home builds and challenging conditions in the rental market, prices are expected to continue rising, though the pace of growth will continue to slow”. It appears as though confidence is placed in the existing home market, as concern around inflated construction costs remain. The President of REIA (Real Estate Institute of Australia), Hayden Groves, stating “home buyers are still not feeling surety around building costs remaining stable”.

We like to think we genuinely have a finger on the pulse, so if you’re ever wanting to chat about the market and how you fare in it, please just reach out to us via contact us or by calling 08 8300 8300.