Predictions on Future Mortgage Rate Changes by Australia's Major Banks

Share and Follow

Australia’s biggest four banks are all predicting the Reserve Bank of Australia (RBA) will cut the official cash rate from the current 4.35 per cent at its February meeting.

NAB said on Thursday the and a softer outlook for housing costs meant it was now joining its competitors in predicting a cut from 18 February.

While the RBA has been holding firm on its path to lower inflation by since November 2023, a decision to lower it would provide relief for borrowers struggling with high mortgage repayments.

ANZ expects the RBA will make two cash rate cuts in a potential cutting cycle, while CBA and Westpac predict four and NAB predicts five.

Annual CPI inflation and trimmed mean over the years since 2014

Wednesday’s inflation figures gave many economists cause to believe the RBA would move to cut rates.

Underlying inflation for the December quarter has eased to 3.2 per cent, the lowest rate since late 2021, according to the Australian Bureau of Statistics (ABS). It was at 3.6 per cent in the previous quarter.

Meanwhile, the Consumer Price Index (CPI) rose by a modest 0.2 per cent in the December quarter and 2.4 per cent annually.

The RBA uses the trimmed mean — which removes the biggest price swings — to measure underlying inflation. It grew 0.5 per cent in the December quarter, the ABS said.

Traders have priced in at least three 0.25 per cent cuts this calendar year, while CBA head of Australian economics Gareth Aird predicted four 0.25 per cent cuts in 2025, which would leave the cash rate at 3.35 per cent.

How would a rate cut impact consumers?

One 0.25 per cent cut, if passed on by banks, would cause monthly repayments on a $600,000 mortgage to drop by $92, according to analysis from financial comparison site Canstar.

For a loan of $1 million, borrowers would pay $154 a month less, based on an owner-occupier paying principal and interest on the average variable rate of 6.33 per cent, with 25 years remaining on the loan.

If the same cut was applied to the average new customer variable rate, it could drop to under 6 per cent. It currently sits at 6.24 per cent.