In a surprise move, the Reserve Bank of Australia (RBA) held the official cash rate (OCR) steady at 3.85% during Tuesday’s policy meeting – catching markets off guard.
The decision comes amid a mixed economic backdrop: inflation has eased to a three-year low and now sits within the RBA’s target range, unemployment remains historically low, yet cost-of-living pressures persist and global uncertainty lingers, from trade tensions to far-off wars. The RBA found itself in a tough position. With all of Australia’s Big Four banks forecasting another cut, the decision to hold rates came as a sharp deviation from expectations. In the end, the central bank opted to pause, citing global uncertainty as a key factor.
Here’s how a few key market players are responding to the unexpected pause.
Chief executive officer at Mortgage Choice
"I'm sure borrowers and hopeful buyers will be disappointed by the Reserve Bank’s decision today to keep the nation’s official cash rate on hold. Today's decision doesn’t mean further cuts are off the table. There are four monetary policy board meetings still to go this year, so rates could drop further.
"We've seen lenders announce reductions to some of their fixed-rate home loan products over the last month, but borrowers haven’t been tempted to lock in their rates. Mortgage Choice submission data reveals that demand for fixed-rate home loans continues to fall, with just 1% of submissions in June having a fixed component. The current market continues to fuel investor activity. Mortgage Choice submission data reveals that the share of loans to investors has climbed to the highest proportion we’ve seen in three years, with 30% of loans submitted in June being for investment loans.”
Chief executive officer at Mortgage & Finance Association of Australia (MFAA)
“The Reserve Bank’s decision to stick with the status quo and not lower the official cash rate may have come as a shock given that most economists had predicted a cut of 25 basis points. Following the RBA decisions to lower the rate in February and May, and recent data showing inflation trending downwards, borrowers were hoping for another cut in July to further ease the pressure on their mortgage payment. However, there’s still an opportunity for mortgage brokers to talk to their clients about repricing, refinancing or other options, such as consolidating debt to put them in a better financial position."
Executive director at Connective
"The RBA may have held steady today, but borrower expectations have not. With inflation softening and cost-of-living pressures still front of mind, borrowers will remain active, and many will continue reviewing their loans in anticipation of future rate cuts. This environment keeps competitive pricing and lender response times in sharp focus, which naturally positions brokers to guide their clients in navigating what this means for them."
Chief executive officer at Finsure Group
"I expected a cut today – and at least two more before the end of the year. The volatility of US tariffs, coupled with general uncertainty in the economy, will continue to put pressure on growth. This will give the RBA reason to consider a couple more cuts."
Business investment lead at CPA Australia
"Today's decision by the Reserve Bank of Australia to keep the official cash rate on hold at 3.85% will be disappointing news for borrowers and businesses. Business sentiment is beginning to shift and further rate cuts this year would be very welcome, but most small businesses remain bound by uncertainty and are still taking a cautious approach. A lower interest rate environment would open up more options for small businesses who could choose to renegotiate loans and reduce their debt burdens, or take the opportunity to invest in growth and perhaps take on more workers."
Economic director at Compare the Market
"Today’s decision may be disappointing, [but] there is hope for borrowers willing to put in some leg work to either negotiate or switch to a better rate.
"Homeowners who have been with the same lender for a number of years need to make sure they are at a rate that is commensurate with what new customers are getting. Compare what other lenders are advertising to see what else is out there. If your lender won’t match the market leading rates, it might be time to switch. Also look out for cashback offers for refinancers, which can be worth thousands of dollars. When so many families are stretched to the max covering everyday essentials, we can’t afford to waste money on our mortgages."
Senior economist at REA Group
“The decision [to hold rates] comes despite recent data showing inflation is easing and economic growth is weaker than anticipated. Today’s decision to hold may slow the pace of price growth seen in the months following the February and May cuts. For many, affordability constraints continue to weigh heavily, as many households grapple with stretched budgets. While the Reserve Bank made the decision to hold today, most forecasters anticipate further cuts to the cash rate before the end of the year."
