If you’re a homeowner who’s been feeling the pinch of rising interest rates, there may finally be some light at the end of the tunnel.
Many Australians have adjusted their household budgets in response to the sustained period of higher borrowing costs.
Therefore, any indication of potential relief from these financial pressures is naturally met with considerable interest.
Westpac, one of Australia’s Big Four banks, has just doubled its forecast for Reserve Bank of Australia (RBA) interest rate cuts, and if their predictions come true, it could mean a significant drop in your monthly mortgage repayments—potentially to the tune of $350 a month.
What’s behind the new forecast?
Westpac’s revised outlook comes on the back of a softer inflation forecast, which has given the bank confidence to predict not two, but four interest rate cuts over the next year.
The bank now expects the RBA to cut the cash rate twice this year—in August and November—and then twice more early next year, in February and May.
If this plays out, the official cash rate would fall from its current 4.35 per cent to just 2.85 per cent by mid-2025.
Luci Ellis, Westpac’s chief economist, says there’s even a chance the cuts could come sooner, depending on how inflation and the jobs market perform.
‘That would mean the RBA cash rate will bottom out at 2.85 per cent, from a peak of 4.35 per cent, and 3.85 per cent currently. We regard the cash rate at 2.85 per cent as being at the lower end of the “neutral range”,’ she explained.
What does this mean for your mortgage?
Let’s talk numbers. According to Canstar, a 0.25 per cent rate cut would reduce monthly repayments on a typical $600,000, 25-year mortgage by about $90.
If Westpac’s four-cut forecast comes true, that’s a total saving of $349 a month—money that could make a real difference for households feeling the squeeze.
Sally Tindall, Canstar’s data insights director, says this would be a ‘huge relief’ for many, but she’s quick to remind us that forecasts aren’t guarantees.
‘While the timing of the next cut is still up in the air, the prospect of at least one more is, at this stage, likely,’ she said.
‘Borrowers shouldn’t be banking on multiple rate cuts just yet, but they can start preparing by shopping around for a better deal, particularly if, as an owner-occupier, their variable rate starts with a “6”.’
What are the other banks saying?
Westpac isn’t alone in predicting rate cuts, but there’s some disagreement about the timing. Three of the Big Four banks expect the RBA to cut rates by 0.25 per cent at its August meeting, with rates likely to stay on hold in July.
NAB is the outlier, tipping a back-to-back cut in July, while Commonwealth Bank says the July meeting is ‘live’—meaning a cut is possible, but not a sure thing.
What could delay the cuts?
Not everyone is convinced the RBA will move quickly. Ellis points out that recent economic data, including ‘disappointing’ GDP growth and a still-tight labour market, may not be enough to prompt a cut in July.
The May labour force data, due next week, is expected to show employment remains strong, and while inflation is easing, the June quarter CPI (Consumer Price Index) could still come in higher than the RBA would like.
The Australian Bureau of Statistics (ABS) recently reported that economic activity grew by just 0.2 per cent in the March quarter, down from 0.6 per cent in the December quarter.
While this slowdown could eventually push the RBA to act, it’s not a slam dunk just yet.
What should you do now?
If you’re a mortgage holder, now is a good time to review your home loan. Even if rate cuts are on the horizon, there’s no harm in shopping around for a better deal—especially if your current rate starts with a ‘6’.
Many lenders are still offering competitive rates, and a little legwork could save you hundreds each month, even before the RBA makes its move.
It’s also wise to keep an eye on your household budget and avoid overcommitting, just in case the rate cuts take longer to arrive than expected.
Remember, forecasts can change quickly, and global events can throw a spanner in the works.
The bottom line
While Westpac’s new forecast is certainly encouraging, it’s important to remember that nothing is set in stone.
The RBA will be watching inflation, employment, and global economic trends closely before making any decisions. But for now, the prospect of lower rates—and a $350-a-month windfall—should give homeowners a little hope.
Have you been feeling the pressure of higher mortgage repayments? Would a $350 monthly saving make a difference to your household budget?
Are you planning to refinance, or are you holding out for a rate cut? We’d love to hear your thoughts and experiences—share your story in the comments below!
Also read: 1,500+ Westpac positions hang in the balance—what you need to know
