Three of Australia’s Big Four banks are now predicting the Reserve Bank of Australia (RBA) will cut interest rates as early as February, bringing potential relief to mortgage holders struggling with high repayments.
Westpac Joins the Rate-Cut Predictions Westpac has now joined Commonwealth Bank and ANZ in forecasting an interest rate cut at the RBA’s next meeting. This shift comes after the latest inflation data showed a sharper-than-expected drop, strengthening the case for the RBA to ease monetary policy sooner rather than later.
According to the Australian Bureau of Statistics, annual inflation slowed to 2.4%, with underlying inflation (trimmed mean) dropping to 3.2% – the lowest in three years. This decline is giving major lenders confidence that the RBA will act sooner to support the economy.
Westpac’s chief economist, Luci Ellis, who previously served as assistant governor at the RBA, confirmed that the February rate cut is now likely, stating, “It’s on.”
What This Means for Mortgage Holders For homeowners with mortgages, this could be a game-changer. Many borrowers have been doing it tough, with some warning they may be forced to sell if relief doesn’t come soon. A Finder survey revealed that one in 10 mortgage holders would need to sell or apply for financial hardship if rates don’t start falling until May.
If the RBA does cut the cash rate by 0.25%, an average mortgage of $641,416 would see monthly repayments drop by around $103 – a small but welcome reprieve for struggling households.
How Low Could Interest Rates Go? Westpac, Commonwealth Bank, and ANZ now expect multiple rate cuts in 2024:
* Commonwealth Bank: Predicts a 0.25% cut each quarter, bringing the cash rate to 3.35% by year-end.
* Westpac: Forecasts cuts in February, May, August, and November.
* ANZ: Expects two rate cuts this year.
* NAB: Predicts three cuts starting in May, followed by two more in 2025, bringing the cash rate down to 3.10%.
Bendigo Bank’s chief economist, David Robertson, also backed the idea of a February cut, stating that the inflation data “opens the door” for the RBA to start easing rates.
The Green Light for Rate Cuts? Gareth Aird, Commonwealth Bank’s head of Australian economics, said the softer-than-expected inflation data was a “green light” for the RBA to move ahead with easing monetary policy.
“Importantly, it was materially softer than the RBA had anticipated when it published its latest forecasts,” Aird said.
Westpac’s Ellis echoed this sentiment, noting that disinflation is happening faster than the RBA originally expected. “We now have just enough evidence to conclude that inflation is coming under control, giving the Board confidence to start the rate-cutting phase in February,” she said.
What Happens Next? The RBA’s next meeting is scheduled for early February, and all eyes will be on the board’s decision. If the expected rate cut goes ahead, it could provide much-needed financial relief for households and potentially give the property market a boost as borrowing costs start to ease.
For homeowners and buyers looking to navigate these changes, staying informed and seeking advice from a mortgage broker or financial expert could make all the difference. Watch this space for more updates as we get closer to the RBA’s big decision!