RBA stands firm despite borrower pain and “crazy” behaviour from the Greens

^ A visual representation of me following the cash rate news this month.

Ignoring some pretty intense calls to cut the cash rate, the Reserve Bank of Australia (RBA) has announced it's holding it where it is at 4.35%.

This was widely expected by all the economists that Finder surveys ahead of the meetings, despite a valiant protest from the Greens party.

If you haven't been following along with your popcorn, the Greens party has not only urged the RBA to cut the cash rate, it has outright refused to back a government reform in an attempt to convince Treasurer Jim Chalmers to step in.

The government is trying to pass legislation on reforming the RBA and although the Greens says it would back it, it's just... not going to. Not until some action is taken to help borrowers.

What are they trying to do?

The Treasurer has the power to override the RBA and make his own cash rate decision. This is what the Greens is fighting for, saying a 0.25% cash rate cut could save the average mortgage holder $100 a month.

"The Greens are using our power in Parliament to fight for renters and mortgage holders," said Greens Economic Justice spokesperson, Senator Nick McKim.

"The Treasurer has the power to step in, he's just not using it. The Reserve Bank could act, but they are not acting."

Finance Minister Katy Gallagher in return has labelled this behaviour "crazy" and accused the party of "craving votes".

Why is this happening?

It's no secret that mortgage holders have been struggling.

The cash rate, and therefore variable mortgage rates, rose 13 times over 2022 and 2023. Rates rose by 4.25% over that time.

To put that into context, someone with a $600,000 home loan could have started with an interest rate of 2.9% and ended up paying 7.15% if they didn't refinance or negotiate a lower rate. That's an extra $1,555 a month in mortgage repayments.

From Finder's own research, we know that 42% of Australian mortgage holders struggled to make their repayment in August. And while $100 or even $200 might not be a game-changer for everyone, it will certainly help.

Senator McKim said that mortgage holders "will continue to hurt until the Treasurer stops finger-pointing and starts acting".

"We aren't going to pass Labor's Reserve Bank reforms until interest rates are cut," continued Senator McKim.

"The Reserve Bank Board are not infallible high-priests of the economy who are above criticism.

"Both the Treasurer and the Reserve Bank Governor have said they want this legislation passed. Now they know what they have to do to get it done."

What will happen next?

Although the RBA didn't budge this time, it's looking more and more likely that it will cut rates soon.

The majority of Finder's panel of economists are predicting the rate will be cut in February 2025. (If that sounds far away to you, it's not. 2025 is fast approaching and there are only 2 RBA meetings in that time.)

Some economists are still predicting the cash rate could be cut in the next 2 meetings before the end of this year. But that number is dwindling. Only 15% of the economists have that expectation, down from the 26% in August who thought the cash rate would be cut this year.

The next RBA decision is on 5 November 2024, so we will see if the Greens keeps up its war on interest rates in that time.

In the meantime, if you are frustrated by today's announcement because mortgage repayments are too much for you, here are some steps you can take:

Take stock of what you're spending.

As a very first step, really analyse where your money is going and see if you can make any savings, either by cutting things out or comparing better providers for things like your internet or electricity. This isn't a complete fix by any means, but it's a good place to start.

Compare other home loan rates.

Take a look around at other home loan interest rates to see how your own rate compares, before you move on to the next steps.

Found a lower rate? Call your lender.

If you've found lower rates, tell your lender and see if they can move you onto a lower rate. If they can't, it might be time to think about refinancing.

Can't see lower rates? Call your lender.

Even if you don't see anything worth switching to, you can still call your lender. You might be able to negotiate a better interest rate. But if not, and you're really struggling with repayments, you should talk to them about hardship plans like repayment pauses or temporary interest-only payments.

If your lender can't help, consider refinancing

If your lender isn't lowering your interest rate, or it's not lowering it enough compared to what's out there, it could be time to refinance. There are other costs to consider though, so it would need to be feasible for you. Read through our pros and cons here.