Interest rates have been tipped to stay on hold when the RBA board meets in August.
Interest rates tipped to stay on hold
Key Updates
- Borrowers could save $76,000 even without rate cut
- Big four bank warns house prices to drop 15 per cent in worrying new trend
- What are we expecting?
- Why these outlier economists predict a rate rise
- Tough months ahead even if RBA holds, Joel Gibson says
- Rate cut may be ‘sooner rather than later’ top economist says
- House prices predicted to slide in every capital city as RBA considers cash rate fate
- Hello and welcome
Borrowers could save $76,000 even without rate cut
While the market is certain interest rates will remain on hold today, financial experts have reminded mortgage holders there are still significant savings to be found by refinancing.
According to analysis by Money.com.au, someone with an average home loan of $700,000 could save about $244 a month by refinancing to the lowest available variable mortgage rate of 5.69 per cent.
That would wipe out more than three-quarters of the increased repayments caused by the RBA’s three rate hikes this year, but the savings could compound far beyond that.
“Instead of pocketing that $244 saving, putting it straight into an offset account or redraw each month could save an estimated $76,373 in interest over 25 years,” a Money.com.au spokesperson said.
“In other words, refinancing to a lower rate and redirecting the repayment savings back towards the mortgage could turn a $244 monthly saving into more than $76,000 in interest savings over the life of the loan.”
The case for a hold
The market is pricing in a roughly 97 per cent chance of a rate hold today, and economists are also adamant the cash rate won’t be budging.
This largely comes down to the better-than-expected June inflation figures we got last month.
While headline and core inflation both remain stubbornly above the RBA’s target, the two figures – 3.8 and 3.6 per cent respectively – were lower than had been forecast.
There are still pressures on inflation, like low unemployment, sticky services inflation, and volatile oil prices caused by the conflict in the Middle East.
However, the data has given the RBA the option of hitting pause for another meeting so it can further evaluate the impact of the three rate hikes already handed down the year before deciding whether another rise is appropriate.
Why are there so many cheaper variable rates available?
Following on from our last post, it would be entirely reasonable to ask why, if the RBA isn’t budging, are there cheaper variable home loan rates available?
According to Canstar, 49 lenders offer at least one variable rate starting with a 5, up from 38 two months ago. Money.com.au says the figure is even higher, at more than 50.
The reason?
Well, with auction clearance rates in the doldrums and fewer properties being sold, that means fewer home loans being written by lenders – many of the big four banks have warned in recent months about downturns to their mortgage businesses.
That makes it all the more important for lenders to attract customers, and one of the most obvious ways to do that is by offering a more competitive interest rate.
“Now’s the time to play a bit of a Mexican stand-off with your lender because banks are struggling to attract new business following the federal budget changes to negative gearing concessions and capital gains tax,” Money.com.au mortgage expert Nick Burgess.
“When home loan applications are slow, banks still have lending targets to hit. They need good borrowers through the door, and that gives existing customers more bargaining power.”
Burgess said that puts borrowers willing to shop around in a strong position.
“Get on the phone and ask for a rate review,” he said.
“If they won’t budge, tell them you’re prepared to walk and see how quickly the conversation changes.
“Banks spend a fortune trying to win new customers. If your lender isn’t prepared to fight to keep you, there’s a good chance another bank will fight to get you.”
‘Be open and honest’: Advice for those struggling with mortgage payments
The Finance Brokers Association of Australia says too many Australians are doing it tough and urged the RBA not to push another rate hike.
“When reviewing interest rates, the RBA must consider the real world, and in the real world people are hurting and mortgage stress is rising,” chief executive Leo Gagic said.
“For the sake of these thousands of Australians just hanging on to their mortgage, I urge the RBA not to consider a rate rise today.”
The FBAA said recent data showed an 18 per cent increase in mortgage default risk.
For those who are struggling, Gagic urged them to “be open and honest about your circumstances and contact your lender as early as possible. Don’t wait until you have missed a payment.”
“Explain your situation and ask to speak with the lender’s hardship team,” he said.
Gagic said lenders might be willing to negotiate a more competitive interest rate or provide temporary relief measures such as reduced repayments, a repayment pause, an extended loan term, or a loan restructure.
And he urged borrowers unable to reach a suitable outcome with their lender to consider speaking with a mortgage broker, who may have other options.
Big four bank warns house prices to drop 15 per cent in worrying new trend
ANZ has become the latest big four bank to predict a major housing correction, forecasting that property prices could drop by up to 15 per cent in some markets over 2026 and 2027.
In a new report this morning, ANZ senior economists Madeline Dunk and Adam Boyton said a combination of interest rates, tax changes and affordability would see the market cool faster than expected.
The biggest fall is forecast for Sydney, where ANZ believes prices will fall by 14.5 per cent from their peak. On a national level, the peak-to-pit fall is anticipated to be around 10.6 per cent.
ANZ is not the only bank to predict a fall in property prices. Earlier this month NAB revised its property forecasts, and is now expecting Sydney and Melbourne’s median dwelling values to fall up to 10 per cent.
CBA, Australia’s biggest bank and the largest mortgage holder in the country, predicts national dwelling prices will be “flat” in 2026.
“We now expect national dwelling prices to be flat over 2026, down from a forecast of 3 per cent at Budget and 5 per cent in March,” Commonwealth Bank senior economists Trent Saunders and Ashwin Clarke said.
RBA to ‘talk tough’ on inflation - but there’s reason for them to be confident
Economist Besa Deda told the ABC this morning the RBA could have some confidence in inflation figures, despite it still running strong.
Inflation is at 3.6 per cent, above the 2 to 3 per cent target band for the RBA.
“But I think given that it’s come in under their forecasts and given that the quarterly result was unchanged from the previous quarter and also weaker than in the quarters before that, I think the Reserve Bank can have some confidence that perhaps the inflation trajectory is going in in the direction that they want,” Deda said.
“Given that the underlying inflation rate is still elevated and before the target rate, I think the Reserve Bank Board and the governor in the associated press conference, will still talk tough on inflation and still want to retain that option to possibly hike again later in the year.”
Rate rise would push millions over the edge
Millions of Australians would have to cut back spending on essentials like groceries and fuel if the RBA kicks rates up another notch.
Research from Compare The Market showed that 65 per cent of Australians said another rate hike would negatively affect them, compared to 35 per cent who said it wouldn’t.
That’s roughly commensurate with the 31 per cent of Australians who own their own home outright.
Breaking the numbers down further, a rate-prompted increase to mortgages or rent would see 29 per cent of people cut back on discretionary spending, while 21 per cent would reduce spending on essentials.
“While another rate rise might look modest on paper, many Australians feel like they’ve already absorbed as much as they can,” Compare the Market economic director David Koch said.
“The reality is a 0.25 per cent increase would add around $120 a month to an average $735,000 loan. That’s not exactly loose change and families need to find that money somewhere.”
Jobs market showing ‘backbone’ in latest numbers
New data from KPMG shows Australia’s labour market remains strong - another factor for the RBA to consider ahead of this afternoon’s decision.
Unemployment in the June quarter was 0.1 per cent higher compared to a year ago, at 4.4 per cent.
And job vacancies fell in the quarter through May, indicating an easing of conditions over the next 12 months.
According to KPMG forecasts, employment growth will likely slow to 1.7 per cent in 2026, while the unemployment rate is likely to edge higher from 4.4 per cent in 2026 to 4.7 per cent in 2027.
But historically speaking, these numbers indicate a very solid jobs sector.
“Australia’s labour market is still showing a fair bit of backbone,” KPMG senior economist Terry Rawnsley said.
“Employment continued to rise strongly into June, participation remains close to record highs, and unemployment is still low by historical standards, which is a solid result given the global uncertainty hanging over the economy.”
Premier discusses royal commission on AI
South Australia Premier Peter Malinauskas says Australia needs to get ahead of the AI boom, after the state announced a royal commission into the issue yesterday.
“I’ve just got back from the US, and I couldn’t help but be completely blown away about the size of the opportunity, but also the scale of the challenge,” he told Today.
“Here we are talking about very complex questions around the way that people work that need to be resolved.
“We’ve got to be thinking about what we’re teaching kids in schools and what level of comfort we have with them using AI, but also thinking about the way that we use AI in public service delivery, where there are clearly some big opportunities around productivity, but also some risks.”
He said the $3 million cost of the royal commission was “small beer” compared to not getting the state’s approach to AI right.
The South Australia government recently signed a memorandum of understanding with OpenAI, but Malinauskas said he expected tech bosses to enthusiastically participate.
“The people that are developing this technology are often the same people who are the most alarmed about it,” he said.
“I mean, we’ve seen warnings come out from the owners of OpenAI, Anthropic, amongst others, saying governments need to wake up and start responding and putting in place some guardrails because the pace of change is so acute, it is so rapid.”
PM’s ‘crude and dirty’ comments spark ‘melon-gate’ furore
The PM’s “melon-gate” scandal continues to trigger outrage and defensiveness in Canberra, generally along predictably partisan lines.
Liberal Senator Michaelia Cash called Albanese’s comments “crude and dirty” on Today, saying he had “embarrassed Australia”.
She also lashed Foreign Minister Penny Wong for “hypocrisy” and demanded she clarify whether she had raised the issue with Albanese.
Independent MP Monique Ryan said Albanese “didn’t really cover himself with glory”, and called on him to apologise.
“I think we can probably expect a bit better,” she said.
Finance Minister Katy Gallagher, on the other hand, told Today Albanese was a supporter of girls and women, and that he had a good relationship with Japanese Prime Minister Sanai Takaichi.
“He has said that those reports, as they are being relayed, are incorrect, and he did not intend for those comments to be read the way that some media outlets are reading them. I accept that,” Gallagher said.
