Rate Cuts Delayed: Prepare for a 2025 Timeline

We've all been eagerly waiting for rate cuts, but it looks like the celebrations will have to wait a bit longer. It turns out, the anticipated reduction in rates might not happen until 2025. Here’s why home loan rates could stay high for a while, and some steps you can take to manage your mortgage in the meantime.

In June, the Reserve Bank of Australia (RBA) once again kept the cash rate unchanged. Rates have remained stable since November of last year, and with no new rate decision expected until August RBA media release, interest rates will stay the same for at least another two months.

Homeowners finding it tough to handle their home loans with current interest rates are asking, "What happened to the discussions about rate cuts in 2024?" Here’s the latest update.

Why Rates Aren’t Moving?

A few months ago, major banks like Commonwealth Bank and Westpac were forecasting rate cuts as early as September. However, this now seems unlikely.

The primary reason is inflation. The RBA aims to reduce inflation to the 2-3% range. Currently, inflation is at 3.6%, which is nearly there but still not within the target range.

When Can We Expect Rate Cuts?

The RBA suggests it could take some time before inflation stabilises within the desired 2-3% range, which is when rate cuts might begin. While this isn’t a concrete timeline, the major banks have their own predictions.

Westpac and NAB now anticipate rate cuts starting in December, while CommBank market outlook had predicted a November rate cut but is increasingly doubtful. Gareth Aird, CBA’s head of Australian economics, noted the challenges posed by persistent inflation and a slowly adjusting labour market, suggesting a later start for rate reductions.

ANZ and Citi economists along with many other experts expect no rate cuts before 2025. Even if a December 2024 cut occurs, the benefits may not reflect in home loans until early next year. Additionally, the RBA’s June statement indicated it’s not ruling out another rate hike before any cuts.

Managing Higher Rates

With potential rate cuts appearing more distant, it is crucial to take proactive measures to manage your finances effectively:

Review Your Budget

Analyse your current spending to identify and reduce unnecessary expenses. This can free up additional funds to allocate towards essential payments.

Use an Offset Account

Consider depositing extra cash into an offset account. This can help reduce the interest on your loan, thereby lowering overall repayment costs.

Take Advantage of Tax Cuts

From 1 July, tax cuts for 13.6 million Australians will come into effect. This additional income can be directed towards your loan repayments to ease your financial burden and boost your borrowing power.

Seek Professional Advice

Consult a trusted financial advisor, such as Osinski Finance, to conduct a thorough review of your current home loan. This may reveal opportunities to switch to a more favourable loan, and potentially save you money in the long run.

Take Control of Your Financial Future with Osinski Finance

Don’t fear the distant rate cuts. What you can do now is prepare for what lies ahead. With Osinski Finance as your mortgage broker, you are at an advantage. We will help you navigate your current loan and provide expert tips so you can manage your financial future effectively.

Whether you’re considering refinancing, revising your budget, or looking into new loan options, our approachable team is ready to assist you—contact us today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.