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RBA Holds Rates: Big Four Banks Adjust Forecasts
This week, the Reserve Bank of Australia (RBA) took the financial community by surprise, opting to maintain the cash rate, contrary to the consensus prediction of a 0.25% cut by major financial institutions, including Australia’s Big Four banks.
Bank Analysts React
With Commonwealth Bank (CBA), Westpac, NAB, and ANZ caught off guard by the decision, they’re now reviewing their forecasts for future rate cuts. Each bank maintains an expectation of further reductions, albeit at a slower pace than previously anticipated.
CBA’s senior economist, Belinda Allen, stated that a rate cut in August now seems "almost certain," provided there are no unexpected inflation spikes. She highlighted that should inflation data align as expected, further cuts could unfold in November. However, she cautioned about the lingering possibility of an additional rate cut in early 2026.
Cautious Steps Forward
Westpac’s chief economist, Luci Ellis, noted a slim chance that the RBA might find August too soon for a cut, especially if inflation figures exceed expectations. Westpac is also projecting rate reductions in November and subsequent months, consistent with the RBA’s gradual policy approach.
NAB’s head of economics, Gareth Spence, echoed similar sentiments, maintaining forecasts for cuts in the same months but added a possible cut for February. He remarked on the RBA’s notably cautious trajectory towards achieving a more neutral policy stance.
ANZ’s head of economics, Adam Boyton, is also anticipating cuts in August and November, aligning with the consensus while signalling a proactive approach for borrowers amid fluctuating rates.
Proposed Cuts Overview
Here’s a brief overview of the anticipated cuts as projected by the Big Four banks:
- CBA: Two cuts in August and November; estimated cash rate at 3.35%.
- Westpac: Four cuts expected across August, November, February, and May; aiming for a cash rate reduction to 2.85%.
- NAB: Three cuts projected for August, November, and February; anticipating a cash rate of 3.10%.
- ANZ: Two cuts in August and November; aiming for a cash rate of 3.35%.
Impact on Mortgage Holders
For borrowers, the implications of potential rate cuts could be significant. Canstar has estimated that across a $600,000 mortgage, two further cuts could reduce minimum repayments by nearly $180, while four cuts might lower this by up to $350, depending on their timing.
Canstar’s data insights director, Sally Tindall, advised borrowers not to simply accept their current terms. Instead, she urged them to negotiate with their lenders or consider refinancing to secure better rates. Currently, many owner-occupiers are on variable rates averaging 5.80%, yet numerous lenders are offering rates below 5.50%.
Conclusion
As the RBA navigates inflation and economic objectives, the outlook remains cautious yet optimistic for future rate cuts. Mortgage holders would do well to stay informed and proactive in managing their financial commitments.
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