There is welcome news for a lot of homeowners, as the Reserve Bank of Australia (RBA) left the cash rate on hold at 3.60%, after 10 consecutive rate rises in the last 10 months. It’s been a journey of stress and uncertainty for a lot of people. It is a welcome relief then as homeowners enjoy a little breather, and assess alongside the RBA.

The good news is the rate of inflation has actually come down.

That will be some comfort to consumer confidence. Where the rate of inflation came down to 6.8% in February from 7.4% in January. Ideally, we want inflation at around 3%, but the fact that it is coming down at all is a very good thing. This will be considered by the RBA alongside the unemployment rate primarily, in terms of determining any future rate rises, that is still the lowest it’s been now in nearly 50 years. One of the main reasons we’re feeling the pinch so prevalently right now, is wages are not generally growing at the same rate of inflation. Household spending though has been shown to have come down substantially, which is another good thing in the context of battling rate rises, with the cost being passed onto more than just petrol and groceries.

One big thing the RBA is looking at is international markets. Globally, we’re not in a good space, especially the United States. News over the last week showed how more than one bank crashed in the US, with the Fed bailing out in assistance. Appropriately, Australia is treading carefully. The aim being to try and weather out the storm as much as we can.

There’s also $370b worth of fixed rate mortgages due to end this year. If inflation, and therefore the cash rate comes down further, great. However, if we get one or two more rate rises, some homeowners may be forced to exit the market if they are unable to refinance in a structure that suits them. If you’re lucky enough to have secured a longer term fixed rate loan before all this, there’s a chance you could ride out this entire period.

There’s an issue within the construction market too, with some major builders in particular going bust in recent months. Working at the scale they have done, these were companies due to deliver a certain number of homes that would on a practical level provide for the economy, including homes to incoming expected migrant workers. So, there’ll be less supply there. On the plus side for homeowners, this will increase demand and put pressure on house prices to either stabilise or potentially go up in the short term.

On top of this, there’s a nationwide shortage of housing. However, the national Home Value Index (HVI) actually rose 0.6% in March. That’s in spite of 10 consecutive interest rate hikes. The shortage of housing explains why house prices have not dropped. Providing further evidence that house pricing is not determined by interest rates, but is one factor, especially so for buyers. Homeowners selling now will be doing so for a real reason. Due to distress, or because they need to downsize, or offload some properties. 

Because, the housing market is pretty resilient long-term. It’ll be tight but what we want to do, especially as investors, is ride this wave out. 

I’ve witnessed people who were debating a year ago whether or not to enter the property market, have their borrowing capacity reduced, in spite of salary increase, due to these consecutive rate rises, when they would have been better off had they jumped in the first place. Since they had everything they needed to be ‘ready’ a year earlier. The lesson is, given the cyclical and long-term nature of property cycles, if you’ve got the pre-approval, the deposit and relevant savings, there’s no reason you should wait. These things come around.

Investors with a portfolio should be reviewing all their properties. Alongside reviewing finances, restructure earlier if need be, because if you wait, it could become too late. Consider, might it be worth paying interest only for a while? (If you’re on principal plus interest payments.) Ask yourself, are you able to really afford it? And, if not, what are you able to do? Do you need to pay down some debt? Do you need to sell a property? Or can you even extend the loan term back out (e.g. 30-years payment, as opposed to 20-years)? 

And, the reason why it’s important as an investor to effectively weather out the storm, is because housing is a necessity. Everyone needs a house over their head. So there’s always going to be that underlying demand. Downturns are generally pretty quick. They don’t last long. That’s why it’s so important to have a buffer, and if you don’t have one – figure one out, or find a new resolve.

The good news is, because it’s a pause, you can tell the RBA is at the end of their tightening cycle. This is very promising news, overall. So even if there are more rate rises to come, it would seem they are close to the end of this current cycle.

The bad news isn’t over but we’ve got a bit of a break.

Inflation is coming down, and that’s what we want to see each month. The RBA will be using these last months of the current financial year to assess just how much they can aim to ease off the tap in the next financial year. Safe to say, they're treading very cautiously and trying to find that balance. That’s something really tricky.