RBA holds May interest rates: What this means for off-the-plan property buyers

The Reserve Bank of Australia (RBA) has decided to leave interest rates unchanged at 4.35% following the board’s May meeting yesterday.

For off-the-plan homeowners and buyers, the current cash rate of 4.35% means the average borrower with a 25-year $500,000 loan at the start of the hikes in May 2022 could soon be paying approximately $1,210 more monthly on their mortgage. This is a 52% increase since the beginning of the cash rate hikes.

In a statement released by the board following yesterday’s announcement, “recent information indicates that inflation continues to moderate, but is declining more slowly than expected.”

The board continued, saying, “Higher interest rates have been working to bring aggregate demand and supply somewhat closer towards balance.”

They warn that “the economic outlook remains uncertain and recent data have demonstrated that the process of returning inflation to target is unlikely to be smooth.”

Based on the assumption that the cash rate follows market expectations, the board forecasts inflation to return to the target range of two to three per cent in the second half of 2025 to mid-2026.

“In the near term, inflation is forecast to be higher because of the recent rise in domestic petrol prices, and higher than expected services price inflation, which is now forecast to decline more slowly over the rest of the year,” the board said.

“Inflation is, however, expected to decline over 2025 and 2026.”

Despite these uncertainties, the RBA assures that returning inflation to target remains their priority.

“Returning inflation to target within a reasonable timeframe remains the Board’s highest priority,” the board stated.

“This is consistent with the RBA’s mandate for price stability and full employment.

“The Board needs to be confident that inflation is moving sustainably towards the target range.

“To date, medium-term inflation expectations have been consistent with the inflation target and it is important that this remains the case.”

While inflation is easing, they stated it is doing so more slowly than expected and remains high.

“The Board expects that it will be some time yet before inflation is sustainably in the target range and will remain vigilant to upside risks,” they said.

“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.

“The Board will rely upon the data and the evolving assessment of risks.

“In doing so, it will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

“The Board remains resolute in its determination to return inflation to target.

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