RBA holds key interest rate at 4.1%

© Reuters.

Investing.com - Reserve Bank of Australia officials held interest rates at 4.1% for the fourth consecutive month on Tuesday, offering a temporary respite to mortgage holders. This decision to keep the cash rate at 4.1% marks the first with Michele Bullock at the helm as the RBA's governor.

Despite a minor increase in monthly inflation figures, the RBA bases its decisions on core inflation, which excludes the most volatile price movements from the headline inflation figure.

By disregarding the sudden price fluctuations last month in holiday spending, fuel, and fruit and vegetables, the annual growth rate for core inflation continued to decelerate slightly. This trend persuaded the RBA that it was appropriate to keep interest rates unchanged for at least another month.

However, overall inflation remains persistently high, leading to predictions of a potential rate hike by the end of the year. This prospect could heighten concerns among homeowners nearing their "mortgage cliff."

RBA officials also discussed data revealing a significant delay between individuals first experiencing financial stress and their appearance in official loan arrears data.

The data also indicated a surge in calls to the National Debt Hotline, including from individuals with steady incomes who had never previously used the service.

According to the RBA, Australian borrowers place an extremely high premium on meeting their commitments to their mortgage lenders. They exhaust every available option, legal or otherwise, before considering selling their homes or facing foreclosure.

The national debt hotline reported a significant number of callers in financial hardship were accumulating additional debts through credit cards, buy now pay later schemes, borrowing from friends and family, and increasingly unpaid obligations to the Australian Taxation Office, utility providers, and council rates.