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RBA Raises Rates In February 2023

RBA Interest Rate February

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The Reserve Bank (RBA) has increased interest rates interested for a record 9th time and increased the cash rate from 3.10% to 3.35%. Independent Mortgage Broker What If We Finance states this is one the most aggressive raising of interest rates in living memory.

Will Interest Rates Fall?

Intrest rate rising

Mortgage Broker Melbourne What If We Finance the RBA Governor is now in a delicate highwire act with the RBA determined to slow inflation within its target range. The RBA said:

“The Board’s priority is to return inflation to target. High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later. The Board is seeking to return inflation to the 2–3 per cent range while keeping the economy on an even keel, but the path to achieving a soft landing remains narrow.”

As the RBA stated, the path to preventing the economy from going into a major economic slowdown is a narrow one and your mortgage broker, What If We Finance, believes if the RBA is overzealous, we can end up with a deep recession similar to early 90s, and this can inflict a lot of pain on households and the economy.

Markets expected 1 to 2 more rate rises, but the interest rate outlook remains uncertain, with mixed economic signals and early signs of inflation falling. One has to wonder if the RBA is equally uncertain.

How Does Inflation Affect Interest Rates

Inflation Affect

Inflation is a core reason for interest rate rises, but Australian inflationary forces have lagged behind other developed markets because they started from a lower point, particularly wage growth. Moreover, energy prices only rose late last year, while flooding in eastern Australia added pressure to food prices.

Retail sales volumes data, released on Monday by the Australian Bureau of Statistics, will comfort the RBA that its policy tightening is succeeding as it aims to return inflation to the 2 per cent to 3 per cent band. Real retail sales dropped 0.2 per cent in the December quarter, the first fall in a year, as consumers started to reduce spending because of higher borrowing costs and inflation. This trend is expected to continue.

Now is the time to talk to the best mortgage broker, What If We Finance and conduct a home loan health check. With access to over 2,000 products and 40 lenders, we can help you save money on your home loan. Contact us today.

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