Since May 2022, the official cash rate has risen 12 times, but when will it begin to fall?
The Reserve Bank of Australia (RBA) decided to keep the official cash rate unchanged at 4.10% during its monthly meeting in September 2023. Despite holding steady for the past 3 meetings now, the cash rate has risen by four percentage points since May 2022, and many household budgets are now well and truly feeling the effects as a result.
It's no surprise then that many mortgage holders are wondering how long it will be before interest rates begin to drop again. Whilst we warn all to only take commentary as a guide rather that fact (especially after the now infamous comments of Dr Philip Lowe stating the RBA would not increase rates until 2024), we can share here the opinions from Australia's four largest banks as to when some rate relief could be on the cards.
The cash rate is anticipated to stay at 4.10% for an extended period, according to CBA. According to the CBA, the RBA will begin an easing cycle in the first quarter of 2024, with a total of 100 basis points of rate decreases next year, leaving the cash rate at 3.10% by the end of 2024.
NAB anticipates one more increase this cycle, raising the cash rate to 4.35%, and believes this will most likely occur at the RBA's November meeting. NAB does note, however, that the likelihood of 4.1% being the cycle's high is increasing as a result of recent data showing a clear trend of reducing inflation and weaker demand growth. NAB predicts that the RBA will begin lowering the cash rate in August 2024 and that it will eventually return to 3% in the early part of 2025.
Westpac expects the cash rate to remain on hold for an extended period of time, but previously acknowledged that the RBA's September decision to pause was a close call. Westpac anticipates the next move will be the first cut in the cycle, which they expect to see in the third quarter of 2024.
According to ANZ, rates will likely stay an extended hold, adding if the Reserve Bank "does move in the near term (or even in the first half of 2024), higher interest rates are much more likely than cuts". according to ANZ, it will likely take place in late 2024. ANZ are forecasting the RBA will begin to lower the cash rate near the end of 2024.
It's crucial to remember that even though the RBA hasn't raised the cash rate since June 2023, there often is a lag between changes to the cash rate and the interest rates that borrowers pay on their mortgage. This means that your home loan's interest rate can rise even with a stable cash rate. It's not uncommon for banks to adjust their rates 'out-of-cycle' in order to maintain their margins or in response to added costs.
Given the above, it's a good idea to double-check that you're still getting a decent deal for your situation, especially if you've had your current loan in place for more than 12 months. An experienced finance broker, such as Credited Finance, can help you with this for free, negotiating on your behalf as well as providing you with alternative options that could better serve your needs.
To find out more, or for a free consultation to discuss your options, call us on 0401 079 049, email us at info@creditedfinance.com.au or send us an enquiry through our Contact Form.