Economists are largely expecting the cash rate to start falling in 2025. After holding the rate at a ten year high of 4.35% in 2024, the Reserve Bank of Australia (RBA) is predicted to begin cutting rates this year. Opinions vary on the timing and number of cuts. Here are the latest predictions from the major banks.
Major banks’ predictions on rate cuts
Australia's big four banks have varying predictions for cash rate cuts in 2025:
- CBA expects the first rate cut of 0.25% in February 2025, with a total of four cuts throughout the year, bringing the cash rate to 3.35% by December 2025.
- NAB anticipates the first rate cut of 0.25% in May 2025, with a total of three cuts throughout the year, ending with a cash rate of 3.60% by December 2025.
- Westpac also predicts the first rate cut of 0.25% in May 2025, but expects a total of four cuts during the year, with a final cash rate of 3.35% by December 2025.
- ANZ forecasts the first rate cut of 0.25% in February 2025, but with only two cuts throughout the year, leading to an end cash rate of 3.85% by December 2025.
What would these rate cuts mean for the average borrower?
Assuming an owner occupier borrower with a home loan of $600,000, with 25 years remaining, making principal and interest repayments at an interest rate of 6.2%, a cut of 0.25% would mean a decrease of $92 in monthly repayments.
With two cuts, the drop in monthly repayments would be $182 and $361 with four cuts.
If five rate cuts happen this year the average borrower would see their monthly repayment being cut by $449.
How to prepare for an interest rate cut
With rate cuts on the horizon, borrowers and property buyers have a chance to prepare strategically. Here are four practical steps you can take now:
- Review your current home loan: Understand your current terms, including your interest rate, your remaining loan term and whether you're on a fixed or variable rate.
- Consider refinancing: If you're currently on a higher rate, refinancing now could lock in savings before rates drop further.
- Plan for a future property purchase: Lower interest rates can boost borrowing power, making it an ideal time to consider purchasing a home or investment property.
- Stay Informed: Keep up with updates on inflation and interest rates to make informed decisions.
A mortgage broker can guide you through these changes, helping you find the most competitive loan options and tailoring solutions to fit your financial goals. At Raiti Finance, we're here to make the process simple and stress-free.
Contact us today to explore your options and get expert advice on how to make the most of the opportunities ahead!
