Is an Interest Rate Cut Coming? Key Predictions for Early 2025
Jamie Smith
Defender Owner ?? BJJ Brown Belt ?? Proud Frenchy Dad ?? Passionate Property and Airbnb Owner ?? Multiple Time RMA Agent of the Year Winner ?? | 300+ Property Sales Expert Negotiator | Committed to Client Success ????♂?
As we move further into 2025, Australia’s interest rate landscape is drawing significant attention. The Reserve Bank of Australia (RBA) has held the cash rate steady at 4.35% since November 2023, but there are growing expectations that rate cuts could be just around the corner. Here’s what you need to know about the potential changes, the predictions from major banks, and how it could impact mortgage holders.
The Big Bank Predictions
ANZ and Commonwealth Bank (CBA) are both forecasting a rate cut when the RBA meets in February 2025. ANZ anticipates a 25 basis point reduction, bringing the cash rate down to 4.1%, while CBA shares a similar outlook, predicting a decrease to 4.1% as well.
On the other hand, National Australia Bank (NAB) and Westpac are taking a more conservative view, expecting any rate cuts to happen later in the year, with predictions pointing to May 2025. This difference in outlook reflects the uncertainty that often surrounds rate movements and how they are influenced by a wide range of economic factors.
Potential Savings for Homeowners
If the anticipated rate cuts materialise, mortgage holders could see a noticeable reduction in their monthly repayments. For instance, if the cash rate is reduced by 25 basis points, a borrower with a $600,000 loan and 25 years remaining could save around $182 per month on their repayments.
If multiple rate cuts take place throughout the year, the savings could become more substantial. For example, five rate cuts could reduce the monthly repayment by as much as $441 for the same loan, while two rate cuts would result in a savings of $182 each month.
This presents a potential relief for many homeowners who have felt the pressure of rising rates over the past year.
Factors Influencing the RBA’s Decision
The RBA’s decision-making is influenced by various key economic indicators, including inflation, employment data, and broader global economic conditions. While inflation in Australia has decreased to 2.3% year-on-year (as of November 2023), underlying inflation remains at 3.2%, slightly above the RBA’s target of 2-3%. These figures indicate that while inflation is under control, it is not yet at the ideal level, which may delay or temper the extent of rate cuts.
In addition, employment data will play a crucial role in determining the RBA’s next move. With job growth remaining strong, the RBA will need to weigh the balance between supporting employment and ensuring inflation remains under control.
What Mortgage Holders Should Do Now
While it’s difficult to predict the exact timing and extent of rate cuts, there are a few key steps mortgage holders can take to prepare for potential changes:
Looking Ahead
As 2025 unfolds, the prospect of rate cuts is increasingly likely, though the timing and number of cuts will ultimately depend on how inflation and other economic factors evolve. Whether you’re looking to refinance, pay off your mortgage faster, or simply stay informed, the key takeaway is to plan ahead and stay proactive. The right strategy could result in meaningful savings over the coming months.