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In a surprise development, one of the country’s big four banks now predicts interest rate cuts could be just weeks away, offering immediate financial relief to average mortgage holders.
ANZ’s Prediction: Rate Cuts by February
ANZ is forecasting the first cash rate cut of 2025 will occur at the Reserve Bank’s (RBA) initial board meeting on February 18. The bank’s revised outlook follows better-than-expected inflation data for November, raising hopes for struggling borrowers.
A single rate cut of 0.25 percentage points could save borrowers $115 per month on a $750,000 loan, based on Canstar.com.au analysis. Those with a $600,000 loan could save $92, while homeowners with a $1 million mortgage may see monthly repayments drop by $154.
Other Big Banks Are Divided
The big four banks are split on when the RBA will act:
- ANZ and CBA predict the first cut in February.
- NAB and Westpac expect the rate drop will occur in May.
ANZ believes there will be just two rate cuts in 2025, while NAB forecasts five.
Small Relief but Big Impact for Some
Sally Tindall, Canstar.com.au data insights director, noted that while $115 in monthly savings might not be groundbreaking, it could make a difference for households struggling to make ends meet.
“A rate cut in February is increasingly likely, but with over five weeks to go until the next RBA meeting, this could change,” Tindall said.
The calculations assume borrowers are paying the RBA average variable rate of 6.33% and account for a 0.25 percentage point reduction.
Data to Watch Before February’s Decision
The RBA’s decision will hinge on upcoming economic data, including:
- Labour Force Figures: Scheduled for release next week.
- Quarterly CPI Results: Expected at the end of January.
“If core inflation continues its current downward trend, we could see the RBA act in February,” Tindall explained. “The RBA is aware of the financial strain mortgage holders face and is eager to provide relief as soon as data supports such a move.”
What This Means for Borrowers
While the prospect of rate cuts brings optimism, it’s essential to keep expectations realistic. The savings from a rate reduction may be modest, but for many households, every bit helps.
Borrowers should also prepare for further volatility, as the RBA remains data-driven and economic conditions evolve.