Reserve Bank hikes cash rate, as expected

THE Reserve Bank has lifted the cash rate by 25 basis points, taking it to 3.35 per cent.

The RBA board said in a statement today (Tuesday, February 7) it expected further increases in interest rates will be needed over the months ahead to return inflation to its target.

RateCity says the rise will mean an extra $908 a month in total for the average borrower with a $500,000 loan, since the start of the hikes last May.

For a $750,000 loan, the rate increase will mean an extra $114 a month or $1362 since the RBA started lifting rates in May.

It is the ninth rise in as many board meetings, taking the cash rate to its highest level since September 2012.

The RBA is seeking to use rate rises to put a lid on inflation, which at 7.8 per cent is the highest it has been since 1990.

Hayden Real Estate Surf Coast valuer, auctioneer and estate agent Bryan Hayden said people should look to history for indicators on how the latest rise would affect house prices and turnover.

“Last year the market was flowing briskly until mid winter and then it slowly levelled out for the six months leading to Christmas. Moving into early 2023 was a time of holiday freedom at last, coupled with nervousness around COVID uncertainty and rising interest rates; and China not being co-operative.

“We should reflect on what makes our market. Firstly, it is always governed by demand and supply and both of these are determined by confidence or lack of confidence.

“Now we are feeling better about life, schools have returned to full capacity, employees are returning to the office in droves, China is sending students back to ‘face to face’ learning in our Universities and tourism is booming  – Well the interesting thing is that ‘open for inspection’ attendees are increasing rapidly and auction attendance also showing an upward trend.”

Mr Hayden said Interest rates might be higher than in 2022 but were still low by all historic measures.

“Commodities, resources and the stock market in general are all strong, and people are spending. We have not witnessed bank foreclosures and demand for employees is as high as in the Gold Rush days.

“Save a world catastrophe, history would indicate the strong market we are experiencing will continue.

“So, what should I do? Don’t try to play the market, do what you need to do. If you need to buy a new home do so. If you think you should sell, then do so. I repeat “don’t try and play the market” , act in the cool of the night without pressure for the best outcome.”

– WITH AAP