January 29, 2025 UFinancial

Inflation drops to 3.2% – What it means for homeowners and buyers​

Good news for mortgage holders, bringing us closer to potential rate stability

The latest inflation data from the Australian Bureau of Statistics has revealed that underlying inflation has dropped to 3.2%, bringing it closer to the Reserve Bank of Australia’s (RBA) target range. This is welcome news for homeowners, prospective buyers, and investors, as it could influence interest rates and borrowing conditions in the coming months.

So, what does this mean for the property market and mortgage holders? Let’s break it down.

What is underlying inflation and why does it matter?

Underlying inflation, also known as trimmed mean inflation, measures the average price increase across the economy while excluding the most volatile items. This provides a clearer picture of long-term inflation trends and helps the RBA determine its monetary policy, including interest rate decisions.

For mortgage holders and those looking to enter the property market, inflation plays a key role in shaping borrowing costs. When inflation is high, the RBA typically raises interest rates to slow down spending and control price increases. Conversely, when inflation is under control, interest rates may stabilise or even decrease, making borrowing more affordable.

Will interest rates drop?

While the drop in inflation is a positive sign, it’s still above the RBA’s target range of 2-3%, meaning the central bank may take a cautious approach before making any rate cuts. However, if inflation continues to decline in the coming months, we could see a shift in monetary policy that benefits borrowers.

For existing mortgage holders, this could mean a reprieve from further rate hikes and the possibility of refinancing at more competitive rates. For first-home buyers and investors, lower inflation could create more certainty in the market, making it easier to plan their next move.

 

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What should homeowners and buyers do now?

With inflation showing signs of easing, now is a great time to review your financial position and mortgage options. Here are some key steps to consider:

  • Review your current mortgage: If you’re on a variable rate, keep an eye on potential changes to interest rates. Refinancing could help you secure a better deal.
  • Consider fixed vs. variable rates: If interest rates are expected to decrease, a variable rate loan may offer more flexibility. However, a fixed-rate loan could provide stability if you prefer predictable repayments.
  • Plan for the future: Whether you’re a first-home buyer, investor, or looking to upgrade, understanding market trends can help you make informed decisions.

At UFinancial, we stay on top of economic trends to help our clients navigate the mortgage landscape with confidence. If you’re wondering how these changes affect your home loan, reach out to our team for expert advice tailored to your situation.

Stay informed with UFinancial

The property market is constantly evolving, and staying informed is key to making smart financial decisions. Follow our blog for the latest updates on interest rates, inflation, and mortgage trends, and get in touch with our brokers to explore your options.

Ready to take control of your home loan? Contact UFinancial today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced, or republished without prior written consent. Content developed in partnership with IFPA.

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