As most market commentators expected, the Reserve Bank decided to hold the cash rate steady at 3.60% at its meeting yesterday. Inflation has moderated since its peak, though recent data suggest it may be a little stronger than earlier forecast. With private demand and housing activity picking up, the Board chose to pause and monitor conditions before considering further moves.
A hold means the cost of borrowing doesn’t change immediately. But in practice, it still ripples through to loans, repayments, budgeting and the decisions people make about buying or investing property. So how will it affect you?
If You Already Have a Home Loan
Variable Rate Repayments
If your mortgage is on a variable interest rate, a hold means your repayments are unlikely to change right away unless your lender decides to pass through smaller adjustments or buffer changes.
The stability can be comforting. But remember: your repayments could still shift in the future if the RBA changes rates or if your lender’s internal settings shift.
Fixed-Rate Loans
If you have a fixed-rate loan that’s about to expire, this “hold” environment gives you a moment to breathe and compare your options.
When your fixed term ends, your loan will typically roll into a variable rate, or you’ll have to choose a new fixed term.
In that transition, you’ll want to shop for the best deal, negotiate and ensure you’re not left paying higher-than-necessary rates.
Budgeting and Buffers
Even though rates are stable, it’s wise to build in a buffer. If your budget assumes that rates might go up in the future, you’ll be better prepared. Unexpected rate hikes can pinch cashflow and stress discretionary spending.
Now is a good time to revisit your budget and see how much flexibility you have in your repayments.
If You’re Buying (or Planning to Buy)
Pre-Approval Checks
Getting pre-approval from a lender is a smart first move. It will give you a good indication of what you can borrow (given current rates, your income, and expenses). In a rate-hold environment, you have a bit more clarity. But keep in mind, lenders often use stress test assumptions (adding margin to the current rate) to see whether you could handle higher rates.
Borrowing Capacity and Serviceability
Even though the RBA rate is stable, your borrowing capacity isn’t fixed in stone. Lenders apply serviceability buffers, meaning they assess whether you could still afford repayments if rates rose, or your expenses increased.
These buffers really matter now. They protect both you and the lender against risk. So don’t assume the advertised rate is all that matters, what counts is what the lender believes you can afford over time.
Timing and Market Sensitivity
A stable rate environment gives you better confidence in timing your purchase. You’re less likely to be surprised by sudden rate hikes just as you commit. But you’ll still want to act with care: interest rate expectations, property supply, and market sentiment can shift, so don’t slack on your checks and readiness.
If You’re Investing (Owning Rental Property)
Cash-Flow Sense-Check
For property investors, the math always comes down to cash flow. In a rate-hold context, you should re-examine your assumptions: Are your rental income forecasts realistic? Are your expenses (maintenance, tax, insurance) current? If interest rates go up, how much margin do you have before the investment becomes unprofitable?
Reviewing Rental Assumptions
It’s a good time to revisit your rental yield assumptions. If you assumed a high rent increase or low vacancy, is that still realistic given your local market?
If your finances leaned heavily on future rent growth, those assumptions need stress-testing now.
Avoiding Over-Leverage
A stable rate environment can be tempting. Sometimes owners push to borrow more because “rates aren’t going up right now.” But that’s risky. If an interest hike does arrive, your margins get squeezed.
Better to build in a buffer or not push borrowing to its absolute limit. Prudent leverage gives you resilience.
Next Steps Checklist
Here’s a simple, practical list you can work through to ascertain what’s best for you in the current rate environment.
- Review your household budget and see how changes in interest rates could affect your cash flow.
- Check when your fixed-rate term expires, if applicable.
- Compare current loan options (variable, fixed, or hybrid) against your existing loan.
- Have a conversation with a finance professional.
If you’re keen to know precisely how this rate outcome impacts your current mortgage or borrowing capacity, our team of Elders Finance Experts are here to help.
Elders Finance offers a wide range of financial products designed to help businesses and individuals across metropolitan, regional, and rural Australia.
They’ll walk you through your options, help you compare deals, and guide you toward what makes the most sense for you.
Contact an Elders Finance Expert in your area here.