Interest Rate Forecast and Predictions for 2025: What Homeowners Need to Know

Now that the Reserve Bank of Australia (RBA) has cut interest rates, homeowners and prospective buyers are left wondering: what happens next? Let's break down the latest cash rate predictions from the big banks and see where rates could be heading for the rest of 2025.

What’s Happening with the Cash Rate?

During the COVID-19 pandemic, the RBA dropped the cash rate to a record low of 0.10% to support economic stability. However, as inflation surged in the following years, interest rates climbed steadily, reaching 4.35% by the end of 2023. The RBA held the rate at this level throughout 2024 to curb inflation.

As inflationary pressures started to ease, Australia’s big four banks predicted that the RBA would cut rates in early 2025—and they were right. The first cut arrived in February 2025, reducing the cash rate to 4.10%. The RBA then held rates steady at its April meeting.

Will Australians See More Rate Cuts in 2025?

With the first cut in place, lenders have started lowering their mortgage rates—but will further reductions follow?

According to Canstar Data Insights Director Sally Tindall, inflation figures are moving in the right direction, making further cuts more likely. She estimates that the February cut alone could inject up to $100 per month back into the budget of a borrower with a $600,000 mortgage.

At this stage, all four major banks predict at least one more rate cut in 2025.

Big Four Banks’ Cash Rate Predictions for 2025

Each of the major banks has weighed in with their expectations for the RBA’s future rate decisions:

• ANZ: One more cut in August, bringing the cash rate to 3.85%.

• Commonwealth Bank (CBA): A cut each quarter, reducing the cash rate to 3.35% by December.

• NAB: A cut each quarter, also targeting 3.35% by December.

• Westpac: Three more cuts this year, aiming for 3.35% by November.

Key RBA Meeting Dates for 2025

Unlike previous years when the RBA met monthly (excluding January), it now meets eight times a year. The next scheduled meetings for 2025 are:

• May 19-20

• July 7-8

• August 11-12

• September 29-30

• November 3-4 (subject to change due to Melbourne Cup Day)

• December 8-9

Will Interest Rates Rise Again in 2025?

While a rate increase seems unlikely this year, further cuts aren’t guaranteed either. The RBA’s monetary policy decisions are influenced by employment data and inflation levels.

• Employment Rate: Australia's workforce participation stood at 67.1% in November 2024, slightly down from the record 67.2% in September.

• Inflation Control: The RBA has a clear mandate to keep inflation within the 2-3% target range before making further cuts.

What Should Borrowers Do Now?

With potential rate cuts on the horizon, homeowners and buyers should:

• Review their mortgage rates and compare lenders.

• Consider fixed vs. variable loans, as future rate movements remain uncertain.

• Keep an eye on the RBA’s next moves, particularly around May and August meetings.

Final Thoughts

The RBA’s actions over the coming months will depend on economic conditions. While most experts forecast additional rate cuts, borrowers should remain prepared for a period of stability before any major changes.

For more expert insights on the Bundaberg real estate market, stay tuned to our blog and Bundaberg Property Pulse podcast!