The most common question we are being asked by customers right now is ‘what will happen with interest rates in 2025'?

With the Reserve Bank of Australia holding the cash rate unchanged since November 2023, there is much anticipation for their first meeting of the year which will be held on 17 & 18 February.

At this stage, it appears unlikely that rates will rise again in 2025. The RBA February meeting outcome is highly dependent on December quarter inflation figures released this week, which show inflation dropped more than expected down to 2.4% over the 3 months to December. This quarterly figure remains within the Reserve Bank's target band of 2-3%, however, the falling inflation figures have been largely down to government interventions such as rent assistance and energy rebates, rather than natural price drops.

Economists at the 4 big banks are increasingly optimistic that the current cash rate of 4.35% will be the peak, however, whenever the first rate cut is announced, anticipation is that the RBA will move slowly with continued reductions to maintain a stable level of inflation.  

At this point in time, ANZ, Westpac and CBA economists have predicted the first rate cut to come in February whilst NAB economists predict any rate cuts will not occur until around May this year.

The banks also differ on their estimations of how may cuts we may see during the year. NAB is predicting 5 cuts over the year, CBA & Westpac are predicting 4 cuts and ANZ is the most conservative with a prediction of only 2 cuts in 2025.

The RBA have consistently stated that it will remain cautious about cutting rates too quickly. Cutting rates too soon could reignite inflationary pressures, undoing the progress made in bringing inflation under control. While rate cuts in the coming months are expected, they are likely to be gradual and contingent on economic data.

A rate decrease of 0.25% on a $500,000 home loan with a term of 25 years would result in a monthly repayment decrease of $78.

Contact an Assured Lending Mortgage Broker today if you would like to discuss your home loan.

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