In May 2022, the Reserve Bank of Australia (RBA) embarked on one of the most aggressive monetary tightening phases in Australian history to combat surging inflation. However, with several consecutive months of RBA’s cash rate remaining unchanged, there is growing speculation that a shift may be underway.
This leads us to the burning question: when can Australians expect interest rates to decline? While we can’t predict the RBA’s actions with certainty, experts are weighing in on the possibility of interest rates decreasing in 2024. Let’s delve into what the major financial institutions are forecasting.
Insights from the Big Four Banks:
- Commonwealth Bank foresees four cash rate reductions, commencing in March 2024 and concluding with a cash rate of 3.10% by the end of the following year.
- Westpac anticipates a more gradual descent, with a cash rate drop forecast for September 2024, followed by another decrease in December, ultimately reaching 3.60%.
- NAB predicts a cash rate cut in August 2024 and anticipates the cash rate will stabilise at around 3% by early 2025.
- ANZ envisions the RBA maintaining the cash rate at its current level for an extended period before easing it toward the end of 2024.
It’s crucial to keep in mind that these predictions are not ironclad. Unforeseen events, such as shifts in global economic conditions or domestic policies, can significantly influence cash rate decisions.
Inflation Considerations
The RBA’s primary objective is to restore inflation within the target range of 2-3%. In recent months, there has been a noticeable decrease in inflation, indicating progress.
According to the RBA’s projections, headline inflation is expected to drop to 4.5% by the close of 2023 and to reach 3% by mid-2025.
Actions for Borrowers
If you’re a borrower, here are some steps to consider:
Stay Informed
Stay abreast of the latest news to remain updated on the RBA’s cash rate decisions. In the coming year, the RBA is altering its approach, following recommendations from the central bank’s review. There will be eight cash rate decisions instead of the previous 11. Four meetings will occur on the first Tuesday of February, May, August, and November, while the other four will be held between these dates (specific dates to be confirmed).
Regularly Review Your Home Loan
Given the potential movement in interest rates, it’s wise to review your home loan, particularly if you haven’t done so in the last two years. Consider requesting a home loan health check from us, and we’ll assess how your current loan aligns with the current mortgage landscape, exploring the possibility of refinancing if it suits your circumstances.
Explore Your Options
If you’re contemplating property purchase following a decrease in interest rates, reach out to us to discuss how a reduction in interest rates might impact your borrowing capacity. We can help you prepare for a property purchase in the near future.
This year promises to be one of change and adjustment for Australian borrowers and property owners. Stay well-informed, regularly assess your financial options, and engage in proactive discussions to navigate the evolving landscape of interest rates and inflation.
