The Illawarra reacts to the RBA's September rate pause

At its meeting on Tuesday, the Reserve Bank of Australia board decided to leave the cash rate target unchanged at 4.10 per cent.

CoreLogic research director Tim Lawless said this was the third month in a row where the RBA board kept the cash rate steady.

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Mr Lawless said with key economic indicators softening over recent months there is mounting speculation the rate hiking cycle peaked in June.

Mr Lawless said it may be too soon for a pause in the cash rate to have a significant impact on purchasing demand.

"Although housing values have trended higher in the past few months, the recovery trend is occurring across volume that remains slightly below the five-year average.

"A more robust recovery in housing market activity is likely to be constrained by high interest rates and affordability hurdles in the short-term."

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This environment may provide challenges for aspiring Illawarra home buyers, but some are maintaining a positive outlook.

Blaine Wordly, 34, and family - fiancée Melissa Burns and their two children, aged five and three - currently rent in Figtree.

They have been saving to buy a home for at least five years, and have built up enough of a deposit to the point where they have been actively able to look to purchase in the Illawarra during the past few months.

Mr Wordly said saving for a deposit had been made more difficult and "frustrating" by the "crazy" cost of living, including rental increases.

"But we feel like we've got to a point where we can potentially find something to buy," he said.

"It's probably not going to be the Rolls Royce of what we're looking for, but hopefully we can get something. We can afford something."

Speaking on Tuesday afternoon, Mr Wordly said he was pleased with the latest rate pause and the possibility the rate hiking cycle has peaked, as it would make it easier for them when they do purchase a home.

"At the price-point we're going to enter the market, the payments could put us close to our limit of what we can afford to pay," he said. "So we'd be pleased if rates stayed as they are."

Mr Lawless said additionally, consumer sentiment, which shows a close relationship with the volume of home sales, has held close to recessionary lows for almost a year.

"A material rise in dwelling sales is unlikely until we see a lift in consumer spirits," he said. "If we see a growing expectation that interest rates have peaked, alongside lower cost of living pressures, sentiment measures are likely to rise, but confidence has a long way to recover before getting back to a neutral setting.

"A recent rise in new listings activity may also test buyer demand, and lead to milder growth in housing values, towards the end of 2023. While a pause in the cash rate may gradually instil more confidence in the market, this is still very much an uncertain and thinly traded upswing."

Graham Cooke, head of consumer research at Finder, said mortgage holders can take a breather from the relentless pressure of the back-to-back interest rate hikes.

"We may even see the rate stagnate until the end of the year," he said.

"The outlook for the economy, though, is still uncertain.

"We are seeing 40 per cent of homeowners struggle to pay their mortgage, with many fixed loan holders facing dramatically higher payments over the coming months."

In a statement, RBA governor Philip Lowe said interest rates have been increased by four percentage points since May last year.

He said the higher interest rates are working to establish a more sustainable balance between supply and demand in the economy and will continue to do so.

"In light of this and the uncertainty surrounding the economic outlook, the board again decided to hold interest rates steady this month," he said.

"This will provide further time to assess the impact of the increase in interest rates to date and the economic outlook.

"Inflation in Australia has passed its peak and the monthly CPI indicator for July showed a further decline. But inflation is still too high and will remain so for some time yet."

Mr Lowe said some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will continue to depend upon the data and the evolving assessment of risks.

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