Your bank could be slashing interest rates soon! 3 of the Big Four banks say ‘It’s on’

In a move that could bring relief to countless homeowners, three of the Big Four banks have now forecasted that the Reserve Bank of Australia (RBA) will cut interest rates as early as February.

This good news comes after reports on mortgage holders calling on the RBA to cut interest rates came out less than a week ago.

Now, joining the ranks of ANZ and the Commonwealth Bank of Australia (CBA), Westpac has adjusted its predictions in light of recent economic data, sparking conversations and hope among mortgage holders nationwide.

The anticipation builds on the back of the latest inflation figures released by the Australian Bureau of Statistics. The data revealed a 0.2 per cent increase for the December quarter and a 2.4 per cent rise annually. More notably, underlying inflation, which strips out volatile price movements, slowed to 0.5 per cent for the quarter, marking its lowest annual rate in three years at 3.2 per cent.

Luci Ellis, Westpac’s chief economist, responded to the inflation report with a confident ‘it’s on’ regarding a February rate cut. This statement carries weight, considering Ellis’s background and understanding of the RBA’s decision-making processes as a former assistant governor (economic).

‘With trimmed mean inflation at 0.5 per cent in the quarter (3.2 per cent year), we have just enough evidence to conclude that disinflation has proceeded faster than the RBA expected, so the Board will have the required confidence to start the rate-cutting phase in February,’ she said.

Westpac’s revised prediction aligns with ANZ, which earlier this month brought forward its rate cut forecast to February. Meanwhile, the Commonwealth Bank has maintained its February prediction since October last year.

Gareth Aird, head of Australian economics at CBA, referred to the recent inflation data as giving the ‘green light’ for a rate reduction next month.

‘Today’s inflation report was overall a little softer than the market expectation, but very much in line with our forecasts. Importantly, it was materially softer than the RBA had anticipated when it published its latest forecasts,’ he said.

The banks’ predictions are not just pulled out of thin air; they are based on careful analysis of economic indicators and trends. Westpac, for instance, had initially expected a February cut but pushed this back to May.

Interest rates
The latest data show that the door is open for a February rate cut.

Now, with the latest data in hand, they have reverted to their original forecast, expecting three further cuts in May, August, and November, which would bring the cash rate down significantly by the end of the year.

‘This is in effect a reversion to our earlier call, now that it has become clearer that the economy is evolving broadly in line with our forecasts, and not the more hawkish view of domestic cost growth that would have led to further delays,’ Ellis explained.

Bendigo Bank’s chief economist, David Robertson, also sees the inflation data as a sign that the door is open for a February rate cut, aligning with their prediction of three cuts in 2025.

The urgency for a rate cut is underscored by a Finder survey, which found that one in ten Australians with a mortgage could face the dire choice of selling their homes or applying for hardship if rates don’t fall by May.

While nearly half of the respondents said they would manage without a rate drop, a significant 40 per cent said they would need to tighten their belts and cut back on spending.

If the RBA does decide to cut rates by 0.25 per cent, the average mortgage holder with a loan of $641,416 could see monthly savings of around $103. This could provide much-needed breathing room for those struggling with high repayment costs.

Stay tuned for more updates as we await the RBA’s decision. The RBA is set to meet on 17-18 February.

Our YourLifeChoices readers, how do you feel about the potential for interest rate cuts? Have you experienced financial strain due to high mortgage repayments? Share your thoughts and stories with us in the comments below.

Also read: Mortgage holders call on the Reserve Bank to cut interest rates

Floralyn Teodoro
Floralyn Teodoro
Floralyn covers different topics such as health, lifestyle, and home improvement, among many others. She is also passionate about travel and mindful living.

4 COMMENTS

  1. Why all the hullabaloo? Didn’t these people live in the 1980s when interest rates were above 16%? Of course they didn’t. We poor working people were having credit cards and lines of credit ‘thrown’ at us, and, we thought that we could repay these ‘loans’ back in no time, but the interest rates kept on rising, and couldn’t meet the repayments, not that I was caught up in the never-ending cycle of debt myself, but I know a few that were.

  2. It is hard to see that a drop of $23.70 a week, based on the figure in the article, will help much. If that is the difference between keeping the house or selling the house, then those people unfortunately don’t need much to go wrong to tip them over the edge. That is not good or even healthy to be in that situation.
    I bought in 1989 and the interest rates quickly rose to 17.5%. I knew of people who retired somewhat earlier than normal because they were getting up to 15% interest on their money. Those same people returned to the workforce some years later when interest rates slowly came down to 9%.
    Now that I am retired I was extremely annoyed when getting much less that 1% on my savings. Even now, the interest rate is only 4.9% and that is based on .4% standard variable rate and 4.4% bonus variable rate. I am sure the bonus variable rate will drop very quickly if the RBA lowers the rate.
    It is a difficult situation, with mortgage holders wanting lower rates and savers wanting better returns on their money.

  3. Of course the banks will all regale about rate cuts, but they won’t pass on the whole amount, it will only be a smaller amount. Any extra money is good, but they need to be made to apply the whole amount so people can get some relief on a first cut. If builders stopped building huge houses with every mod con available and got back to more basic houses prices would surely drop. Of course people should not overextend themselves and factor in big rate rises and if they are capable of paying the mortgage. We’ve got to stop being so greedy and wanting what someone has and be happy until we can afford to move up the ladder.

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