As of November 2023, the Australian financial landscape has been significantly impacted by a series of interest rate hikes. The Reserve Bank of Australia (RBA) raised the official cash rate to 4.35% in its latest adjustment, marking the 13th increase since May 2022. This trend has put substantial financial pressure on homeowners, with those holding a $500,000 mortgage over 30 years now facing around $1,301 more in monthly repayments than in April 2022 – a staggering annual increase of over $15,600.
With many mortgage holders feeling the strain, there is growing interest in when the RBA might start to lower rates again. To provide insight into future rate movements, we examine the forecasts of Australia’s big four banks – ANZ, Commonwealth Bank, NAB, and Westpac.
ANZ predicts that the RBA won’t begin reducing the cash rate until the last quarter of 2024. By March 2025, they anticipate the cash rate to decrease to 3.85%. While ANZ has not added further rate hikes to its forecast, it acknowledges that the risks are skewed towards additional action.
Commonwealth Bank’s Prediction:
The Commonwealth Bank forecasts a hold on the cash rate at its current level, with the potential for another hike in February 2024. They expect the RBA to start an easing cycle in September 2024, with the cash rate falling to 3.60% by the year’s end.
NAB anticipates another rate hike of 25 basis points, predicting a peak rate of 4.6% in February, though a rise in December remains possible. They foresee rate cuts starting in November 2024, followed by gradual reductions through 2025 and early 2026, bringing the cash rate down to 3.1%.
Westpac does not expect further rate rises but doesn’t rule out the possibility if inflation surprises on the upside. They predict the first rate cut in late 2024, around the September quarter, and expect the cash rate to reach 3.85% by the end of 2024, with an additional 50 basis points worth of cuts in the first half of 2025.
In summary, all four major Australian banks converge on the expectation that the RBA will start lowering interest rates in late 2024. This consensus provides a crucial insight for homeowners and investors, suggesting a potential easing of the current financial pressures towards the end of 2024 and into 2025. However, it is important to note that these forecasts are subject to change based on economic data and global financial trends.