When will interest rates drop?

Homeowners have been waiting with bated breath for 12 months now to see when the Reserve Bank of Australia (RBA) will cut interest rates which have been on hold since November 2023.

Many hoped that 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.

When will it be Australia’s turn?

So far, the RBA Board has held firm about the need to maintain a restrictive monetary policy for the time being. Many experts are predicting early 2025.

What’s happening with inflation?

Inflation has been trending lower, which is promising. However, the RBA is still waiting for a more sustained drop before cutting the cash rate.

What are 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 – the CBA is still optimistic that we will see a 0.25 per cent cash rate cut in December 2024.
• National Australia Bank – NAB has 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, followed by one cut per quarter until 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 cuts, mortgage holders on variable interest rates could save on their repayments. The higher the loan, the bigger the savings will be.

Next steps?

With a cash rate cut likely on the horizon, 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. We can also provide advice about interest-saving features like an offset account or a redraw facility. Get in touch with our team today.