𝗛𝗼𝗺𝗲𝗼𝘄𝗻𝗲𝗿𝘀 have been waiting with bated breath to see when the Reserve Bank of Australia (RBA) will cut the cash rate.
It’s been on hold at 4.35% since November 2023.
Some hoped a cash rate cut may come after the US Federal Reserve cut interest rates by 0.50 per cent last month, joining other countries like New Zealand, Canada and the UK in giving homeowners a reprieve.
However, so far the RBA Board has held firm about the need to maintain a restrictive monetary policy for the time being.
Some economists believe it could still happen this year, while most say early 2025 is more likely.
𝗪𝗵𝗮𝘁’𝘀 𝗵𝗮𝗽𝗽𝗲𝗻𝗶𝗻𝗴 𝘄𝗶𝘁𝗵 𝗶𝗻𝗳𝗹𝗮𝘁𝗶𝗼𝗻?
Inflation has been trending lower, which is promising.
In August, we saw Australia’s annual inflation rate fall to the lowest level in three years, at 2.7%. That was down from July’s 3.5% annual pace.
However, the RBA is still waiting for a more sustained drop before cutting the cash rate.
“The board needs to be confident that inflation is moving sustainably towards the [2-3%] target before any decisions are made about a reduction in interest rates,” RBA Governor Michele Bullock said.
𝗪𝗵𝗮𝘁 𝘁𝗵𝗲 𝗕𝗶𝗴 𝗙𝗼𝘂𝗿 𝗯𝗮𝗻𝗸𝘀 𝗮𝗿𝗲 𝘀𝗮𝘆𝗶𝗻𝗴
Australia’s Big Four banks agree that rates have peaked, but not all are on the same page as to when the RBA might make its first cash rate cut.
𝗖𝗼𝗺𝗺𝗼𝗻𝘄𝗲𝗮𝗹𝘁𝗵 𝗕𝗮𝗻𝗸 – CBA is still optimistic that we will see a 0.25 per cent cash rate cut in December 2024. Their forecast was pushed out from November to December following recent strength in employment growth.
𝗡𝗔𝗕 – NAB brought forward its forecast of when the RBA will cut interest rates to February 2025, rather than May next year. It’s anticipating a 0.25 per cent decrease to 4.1 per cent in February, followed by one cut per quarter until the cash rate is 3.1 per cent in early 2026.
𝗪𝗲𝘀𝘁𝗽𝗮𝗰 – Westpac expects the cash rate will remain unchanged until February, which will mark the first of four 0.25 per cent cuts throughout 2025.
𝗔𝗡𝗭 – ANZ agrees the RBA is likely to start an easing cycle from February 2025.
𝗪𝗵𝗮𝘁 𝗱𝗼𝗲𝘀 𝘁𝗵𝗶𝘀 𝗺𝗲𝗮𝗻 𝗳𝗼𝗿 𝗵𝗼𝗺𝗲𝗼𝘄𝗻𝗲𝗿𝘀?
If lenders pass on the cash rate cut, mortgage holders on variable interest rates could save on their repayments.
Running through the numbers, a 0.25 per cent cash rate cut would shave $92 off monthly repayments on a $600,000 loan, bringing them down to $3,907 per month.
Those with a $750,000 mortgage would be looking at a saving of roughly $114 per month.
𝗡𝗲𝘅𝘁 𝘀𝘁𝗲𝗽𝘀
With a cash rate cut likely on the horizon within the next four months, now is the time to review your home loan and weigh up if it still serves your needs.
Speak to us and we’ll explain whether refinancing could be a good option for you in the current mortgage environment.
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