The Reserve Bank has held official interest rates steady for the first time in a year, delivering some pre-Easter relief to the nation’s home buyers.

Following its meeting on Tuesday morning, bank governor Philip Lowe confirmed the official cash rate would remain at 3.6 per cent until at least May. The decision was in line with financial markets’ expectations.

On an average $600,000 mortgage, repayments have climbed to almost $3600 a month since last May.Credit:Peter Rae

The bank has lifted the cash rate at its past 10 consecutive meetings. On an average $600,000 mortgage, repayments have climbed to almost $3600 a month over that period. In April last year, monthly repayments on the same mortgage were $2370.

But with signs that inflation pressures are easing and consumers are winding back spending, and concerns over the global banking system, the RBA decided to hold the cash rate this month.

Ahead of the decision, there was further evidence of the impact of the bank’s aggressive tightening of monetary policy.

The ANZ-Roy Morgan weekly measure of consumer sentiment lifted slightly over the past seven days but remains close to the lows reached at the start of COVID-19 shutdowns in early 2020.

Senior ANZ economist Adelaide Timbrell said confidence among those paying off a mortgage fell another 2.1 points as previous interest rate rises started to hit the hip pockets of borrowers.

“Confidence in financial conditions, particularly current financial conditions, is now trending lower than it was during the initial COVID outbreak as ongoing inflation and the rapid rise in the cash rate bites household budgets,” she said.

CreditorWatch chief economist Anneke Thompson said monetary policy was now in restrictive territory, which meant the economy could not grow with the cash rate at its current level.

“This is, of course, intentional and now the question is how long the RBA needs to keep the cash rate in restrictive territory before they can release the brakes, so to speak, and allow less restrictive credit conditions,” she said.

“Today’s decision will buy the RBA one more month to assess incoming data before inflicting any more pain on Australian borrowers.”

More to come

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