Inflation shock a mixed bag for homeowners

Cash-strapped homeowners have been warned to not “let their hair down” yet as inflation falls. Picture: NCA NewsWire / Roy VanDerVegt

With inflation falling faster than expected the Reserve Bank of Australia could shift into “neutral” over the summer, experts predict, with mixed results for struggling homeowners.

The Australian Bureau of Statistics revealed on Wednesday that inflation fell from 5.6 per cent to just 4.9 per cent, according to the monthly its Consumer Price Index.

Excluding volatile items and holiday travel, the most recent CPI indicator is the lowest recorded since April 2022 and nearing half the peak recorded in December 2022.

RateCity research director Sally Tindall said while the RBA might put rates rises on hold as a result, it did not mean “borrowers should let their hair down over summer.”

RBA governor Michele Bullock will announce next week if the cash rate will be increased. Picture: NCA NewsWire / Martin Ollman

“Monthly CPI is now moving back in the right direction, but the last two sets of results have shown us just how quickly bumps in the road can spring up,” she said.

“Most households haven’t begun paying for the November rate hike, which is likely to start coming out of their bank accounts from the New Year.

“On top of this, the RBA could still plate up another hike at the first meeting of 2024, particularly if it looks like people have been letting the purse strings go over summer.

“If you’ve got a mortgage, plan for at least one more hike. If it doesn’t happen, then you’ll be able to put that extra cash back into your loan.”

The big four banks predict the RBA will keep the cash rate on hold. Picture: NCA NewsWire / Roy VanDerVegt

Currently, the big four banks predict the RBA will keep the cash rate, which currently sits at 4.35 per cent, on hold.

CBA, Westpac and ANZ have stated the cash rate had now peaked in the current cycle, with NAB being the only bank to predict one more hike early in the New Year.

Nonetheless, RateCity said Wednesday’s result was a “critical piece” of the RBA’s puzzle ahead of the December Monetary Policy Meeting, with increases to unemployment.

While the Black Friday sales are set to boost retail trade data next month, RateCity said it was unlikely to be enough to push the RBA into another hike ahead of Christmas.