May 2024 RBA Update: Inflation remains high, interest rates steady

On Tuesday, the 07th of May 2024, the Reserve Bank of Australia (RBA) decided to maintain the interest rates at 4.35%, marking the fourth consecutive month where the rate has remained unchanged. Recent data available to the RBA indicates that inflation continues to slow but is declining more slowly than expected. The CPI grew by 3.6 per cent over the year to the March quarter, down from 4.1 per cent over the year to December 2023.

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 capital cities. However, the risk of an interest rate rise hasn’t dissipated especially if the June 2024 inflation figures show that inflation is falling less than expected.

With returning inflation to target being the RBA’s primary goal, the path of interest rates will be dictated by the inflation data and other factors such as developments in the global economy. Domestic demand has fallen in the first half of this year, which suggests the June 2024 inflation figures could show inflation is easing at the rate the RBA needs it to be.

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 5 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 still be a viable option if you are looking for certainty of repayments for the first few years of being a first home buyer. Most lenders are still pricing their fixed rates above the current variable rates on offer.

Borrowing Capacity

With costs of living pressures easing and interest rates remaining steady, your borrowing capacity amongst most lenders would be similar to that of a few months ago. However, as some lenders are dropping their advertised rates to new customers, this will result in an increased borrowing capacity as your assessment rate is also less as a result. 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.


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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 early next 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. With an interest rate cut expected to fuel demand for property as consumer’s borrowing power increases, this may result in higher median prices.

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, some 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 and rates starting from 6.10%.

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.

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Written By,

First Home Buyers Australia

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First Home Buyers Australia
First Home Buyers Australia

Australia’s leading organisation specialising in assisting first home buyers achieve the great Australian dream of property ownership.