From May 2022 to November 2023, the Reserve Bank of Australia (RBA) increased the cash rate 13 times to control inflation. This cycle began with a cash rate of 0.10% in April 2022, peaking at 4.35%. Borrowers are keen to know when the RBA will start cutting rates, as this could mean lower mortgage repayments if cuts are passed on by their banks.
Big Four Banks’ Cash Rate Forecasts
The RBA has held the cash rate steady in its first two meetings of 2024. The most recent inflation data suggests another hold in May, but nothing is guaranteed. Here’s what the big four banks predict for future cash rate movements:
- CBA: Peak of 4.35% in November 2023, dropping to 3.10% by December 2025
- Westpac: Peak of 4.35% in November 2023, dropping to 3.10% by December 2025
- NAB: Peak of 4.35% in November 2023, dropping to 3.10% by November 2025
- ANZ: Peak of 4.35% in November 2023, dropping to 3.60% by December 2025
These predictions can change, so they should be considered as guidance rather than certainty.
What Would a Cash Rate Cut Mean for Your Home Loan?
According to the RBA, the average variable home loan rate for existing owner-occupiers is 6.38%. If the banks’ predictions hold true and they pass on the cuts fully, here’s what the average home loan rates could look like:
Average Interest Rates Based on Big Four Bank Predictions
| Starting Month | Average rates based on CBA forecast | Average rates based on Westpac forecast | Average rates based on NAB forecast | Average rates based on ANZ forecast |
| Jun-24 | 6.38% | 6.38% | 6.38% | 6.38% |
| Jul-24 | 6.38% | 6.38% | 6.38% | 6.38% |
| Aug-24 | 6.38% | 6.38% | 6.38% | 6.38% |
| Sep-24 | 6.38% | 6.38% | 6.38% | 6.38% |
| Oct-24 | 6.38% | 6.38% | 6.38% | 6.38% |
| Nov-24 | 6.13% | 6.13% | 6.13% | 6.38% |
| Dec-24 | 6.13% | 6.13% | 6.13% | 6.38% |
| Jan-25 | 6.13% | 6.13% | 6.13% | 6.38% |
| Feb-25 | 5.88% | 6.13% | 5.88% | 6.13% |
| Mar-25 | 5.88% | 5.88% | 5.88% | 6.13% |
| Apr-25 | 5.88% | 5.88% | 5.88% | 5.88% |
| May-25 | 5.63% | 5.88% | 5.63% | 5.88% |
| Jun-25 | 5.63% | 5.63% | 5.63% | 5.88% |
| Jul-25 | 5.63% | 5.63% | 5.63% | 5.88% |
| Aug-25 | 5.38% | 5.63% | 5.38% | 5.88% |
| Sep-25 | 5.38% | 5.38% | 5.38% | 5.88% |
| Oct-25 | 5.38% | 5.38% | 5.38% | 5.88% |
| Nov-25 | 5.13% | 5.38% | 5.13% | 5.63% |
| Dec-25 | 5.13% | 5.13% | 5.13% | 5.63% |
Impact of Rate Hikes on Mortgage Repayments
| Home loan | Monthly repayments |
| Average rate in April 2022 – 2.86% | $2,335 |
| Forecast average rate in 2024 – 7.11% | $3,545 |
| Difference | $1,210 |
Analysis shows the impact of these rate hikes on a 25-year, $500,000 home loan. If all hikes were passed on in full:
- Monthly Repayment Increase: $1,210 more in April 2024 compared to April 2022
This equates to significant additional costs for homeowners, equivalent to purchasing a new iPhone every month.
Strategies to Manage Higher Repayments
Homeowners should take steps to manage higher repayments:
- Make Extra Repayments: Reducing the principal amount can lower interest charges over time.
- Offset Account or Redraw Facility: Using these can help minimize interest payments.
- Refinance: Consider switching to a lower-rate lender that fits your financial needs and budget.
By being proactive, borrowers can better manage their home loan repayments despite the uncertain interest rate environment.
