On Tuesday the 19th of March, the Reserve Bank of Australia (RBA) decided to maintain the interest rates at 4.35%, marking the third consecutive month where the rate has remained unchanged. Many experts are predicting that we have already hit the peak of this interest rate cycle due to the inflation rate appearing to come within RBA’s control. The inflation rate dropped to a 2 year low over the December 2023 Quarter. According to the RBA, their data suggests that inflation continues to moderate, in line with the RBA’s latest forecasts. They also forecast for inflation to return to the target range of 2–3 per cent in 2025-2026.
Let’s break down what this month’s RBA meeting decision means for first home buyers:
Interest rate stability
The RBA decision has meant that first home buyers now have some level of certainty in regard to their home loan repayments, especially with rates expected to remain steady for an extended period of time. With many experts (including Australia’s largest lenders) predicting that the next time the rates move it will be a rate cut, this has instilled a level of confidence in first home buyers. At FHBA, we are noticing more first home buyers are considering entering the market as property prices have steadied across some capitial citites.
First home savers
When the RBA keeps interest rates on hold, savings account and term deposit rates also remain stable. Savers won’t see an immediate increase in their returns, but they won’t experience a decrease either. First home buyers may want to consider using the Federal Government’s FHSS Scheme, which assists you in saving for a deposit sooner.
See what first home buyer rates are available now
Mortgage repayments
For those aspiring first home buyers looking for a variable interest rate home loan, these rates can move according to the RBA’s cash rate movements. Since this rate hasn’t changed over the last 4 months, first home buyers are actually able to get lower interest rate offers now which has an impact of reducing your mortgage repayments. A fixed rate loan may be an option if you are looking for certainty of repayments for the first few years of being a first home buyer.
Borrowing Capacity
With costs of living pressures easing and interest rates remaining steady, this bodes well for your borrowing capacity if you are looking to buy your first home over the next few months. As lenders are dropping their advertised rates to new customers, this will result in an increased borrowing capacity as your assessment rate also falls. The assessment rate is an interest rate that includes a buffer in addition to the lenders’ standard variable rate (SVR) minus any discretionary discounts offered to first home buyers. The assessment rate is typically 2-3% above this discounted rate, however, the assessment rate differs from lender to lender.
Will interest rates fall in 2024?
All major banks in Australia (ANZ, Commonwealth Bank, NAB & Westpac Bank) are predicting that interest rates will remain stable for the majority of 2024 before a potential rate cut in the second half of the year. The Big 4 banks are also predicting the RBA cash rate to fall to below 3% in 2025. This means that as an aspiring first home buyer your rate could start with a 4 in 2025.
In summary, the RBA’s decision to hold interest rates has implications for both savers and home loan borrowers. It’s essential to stay informed and consider how this impacts your financial situation. Speak to a FHBA Coach for more information.
How will it impact property prices?
Generally speaking, when the RBA Cash Rate is steady or falling, this can fuel demand for property. Whilst interest rates have risen since 2022, property prices have not changed much, in fact in some states such as WA they have increased substantially. Will future RBA Cash Rate cuts lead to an increase in property prices again?
As a first home buyer, you do have many options to get into the property market, sooner than you may think! Find out more by clicking here to see what options are available to you:
What rates are on offer now?
The good news is that over the past few months, most lenders have cut their advertised fixed rates to below 6% and variable rates are also trending towards below 6%. Australian lenders have a good track record of predicting which way the interest rates are going to go in the future, therefore this is a good sign for aspiring first home buyers looking to buy their first home in 2024. If you are looking to take advantage of the 5% FHBG Scheme, FHBA has access to some special offers under this scheme with access to all the FHBG lenders.
At FHBA Mortgages, you can compare home loans by clicking on the button below or alternatively you can book a call with an FHBA Coach. Our Coaches will be able to give you a tailored quote based on your credit history & deposit levels.
Written By,
First Home Buyers Australia
