Why Are Banks Expecting Rate Cuts?
Recent inflation data has played a significant role in shifting these forecasts. The Australian Bureau of Statistics reported that the annual inflation rate fell to 2.4% in the fourth quarter of 2024—the lowest since early 2021. This drop is largely attributed to declining electricity and fuel prices, as well as a slowdown in new dwelling costs.ANZ’s Senior Economist, Catherine Birch, noted that housing disinflation has contributed significantly to these changes. Rent inflation eased to 0.3% month-on-month in December, down from the previous 0.6% trend, and new dwelling costs have remained steady. This shift supports expectations that the RBA may start cutting rates sooner rather than later.
How Rate Cuts Affect Borrowers
A rate cut could provide relief to mortgage holders by lowering monthly repayments. However, the extent of this benefit will depend on how quickly lenders pass on these reductions. For first-home buyers, lower interest rates might improve borrowing capacity, making homeownership more accessible.The Westpac-Melbourne Institute's 'time to buy a dwelling' index recently surged by over 10%, indicating renewed optimism in the housing market. A lower cash rate could further boost confidence, potentially increasing demand for property. However, CoreLogic has cautioned against expecting a rapid surge in home values, as broader economic conditions will still play a role.
What This Means for You
If you have an existing mortgage, now is the time to reassess your loan structure. Refinancing into a lower rate product before the market shifts further could be a smart move. For those considering purchasing property, a lower rate environment may create new opportunities, but it’s important to remain strategic in decision-making.Anton Stevenson, Head of Home Loans at Compare Club, noted that lower interest rates typically reduce banks' servicing buffers, making it easier for individuals to meet loan eligibility requirements. This means that if you've been struggling to secure financing, upcoming rate cuts may improve your chances.
How Mankin Finance Can Help
At Mankin Finance, we stay ahead of market trends to ensure our clients make informed financial decisions. Whether you're looking to refinance, secure a competitive home loan, or explore investment opportunities, our team is here to guide you through the changes ahead.
Get expert advice tailored to your financial goals. Contact Mankin Finance today to discuss how potential rate cuts could work in your favour.
