The Reserve Bank of Australia (RBA) is poised for an important meeting on Tuesday, where it’s anticipated that the cash rate will be reduced by 0.25%, setting it at 3.60%. This decision could lead to significant savings for Australian homeowners, particularly those with an average mortgage of $659,920, who might see a reduction of approximately $105 in their monthly repayments, translating to around $1,262 annually. Cumulatively, considering all three rate cuts projected for this year, savings could swell to $2,129 per year, equating to $177 in monthly payment relief.
A survey conducted by Finder indicates that about 88% of economists and experts believe a rate cut is imminent. All major banks, including the Big Four – Commonwealth Bank, ANZ, NAB, and Westpac – are also forecasting this cut, with several banks expecting additional cuts throughout the remainder of the year. AMP’s chief economist, Shane Oliver predicts multiple cuts spanning July, August, November, and February, citing a decline in inflation and lower than expected GDP growth as key factors driving this potential easing of monetary policy.
Matthew Peter, chief economist at QIC, agrees, asserting there’s no reason for the RBA to delay a cut, given that underlying inflation is within the acceptable range and consumer spending is underwhelming. However, not all analysts share the same perspective. A minority of experts, including Andrew Wilson from My Housing Market, suggest keeping rates on hold to maintain the balance achieved between inflation control and economic growth, observing a strong job market.
Beyond Tuesday, the consensus remains that another rate cut will likely occur in August, with over three-quarters of experts supporting this view. The expectations of the banks also vary, with Commonwealth Bank and ANZ looking at two cuts in July and August, while NAB sees three rate cuts within the same timeframe. Westpac has a more aggressive forecast, suggesting up to four cuts, contingent on the RBA’s stance post-meeting.
Markets have labelled the anticipated July cut as almost guaranteed, though the likelihood of subsequent cuts in August has decreased slightly, dropping to about 65% from previous estimations of 80%.
In light of these developments, Finder’s head of consumer research, Graham Cooke, highlights that homeowners are anxiously awaiting further rate relief, even though their cost of living pressure indicator remains alarmingly high at 74%. Cooke also observes that homeowners could benefit from switching providers to secure better rates, especially if their current mortgage rates exceed 5.5%.
Additionally, maintaining consistent repayments instead of lowering them post-rate cut could enable borrowers to reduce their principal balance more quickly, which would ultimately save them thousands in interest over the life of their loan.
As the situation unfolds, Australians are encouraged to stay informed about financial news and developments through various platforms, including social media channels like Facebook, LinkedIn, and Instagram. The potential easing in monetary policy signals a pivotal moment for mortgage holders across the country, creating an opportunity for many to gain financial relief.
