If you’re in the market to buy a property or refinance your existing home loan, compare your January 202 options before selecting a mortgage deal.

Will interest rates rise in 2025?

From May 2022 to November 2023, the Reserve Bank of Australia (RBA) increased the cash rate 13 times to help tame inflation.

This current cycle of cash rate movements started with a cash rate of 0.10% in April 2022. We are now considered to be at the peak of the cycle, with a rate of 4.35%.

Many borrowers are eager to know when the RBA will begin cutting the cash rate. If the RBA does choose to cut - and provided the borrowers’ bank passes the cut on in full - it could mean relief for mortgage repayments.

However, there are a number of factors that will determine if the RBA will cut the cash rate, but we can look to the big four bank economic teams for some clues.

Big four banks’ cash rate forecasts

The RBA has kept the cash rate on hold throughout 2024, and while the Governor has stated that rate cuts are unlikely in the near term, it’s never a guarantee.

The big four bank economic teams have all cast their predictions for the next series of cash rate movements:

• CBA: Peak of 4.35% in November 2023, then dropping to 3.35% by December 2025
• Westpac: Peak of 4.35% in November 2023, then dropping to 3.35% by December 2025
• NAB: Peak of 4.35% in November 2023, then dropping to 3.10% by June 2026
• ANZ: Peak of 4.35% in November 2023, then dropping to 3.85% by August 2025

Keep in mind that these are just predictions, and that the big banks are subject to change these forecasts.

What would a cash rate cut mean for my home loan?

According to the Reserve Bank of Australia, the average existing owner-occupier is on a variable home loan rate of 6.37%.

This is what average home loan interest rates may look like if the big four bank predictions are accurate, and the banks pass on the rate cuts in full.

Average interest rates based on big four bank cash rate predictions to Dec 2025

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
Aug-24	6.37%	6.37%	6.37%	6.37%
Sep-24	6.37%	6.37%	6.37%	6.37%
Oct-24	6.37%	6.37%	6.37%	6.37%
Nov-24	6.37%	6.37%	6.37%	6.37%
Dec-24	6.37%	6.37%	6.37%	6.37%
Jan-25	6.37%	6.37%	6.37%	6.37%
Feb-25	6.12%	6.37%	6.37%	6.12%
Mar-25	6.12%	6.37%	6.37%	6.12%
Apr-25	6.12%	6.37%	6.37%	6.12%
May-25	5.87%	6.12%	6.12%	6.12%
Jun-25	5.87%	6.12%	6.12%	6.12%
Jul-25	5.87%	5.87%	6.12%	6.12%
Aug-25	5.62%	5.87%	5.87%	5.87%
Sep-25	5.62%	5.62%	5.87%	5.87%
Oct-25	5.62%	5.62%	5.87%	5.87%
Nov-25	5.37%	5.62%	5.62%	5.87%
Dec-25	5.37%	5.37%	5.62%	5.87%

Source: RateCity.com.au, big bank cash rate forecasts as of 15/01/2025. 

If you are currently on a variable rate home loan, and your lender has passed on on these rate hikes in full, you may find your home loan repayments have become significantly more expensive.

If you are still on a fixed rate home loan from the low-rate era, when your loan term ends you may be reverted to a much higher interest rate.

How high have mortgage repayments risen?

RateCity has crunched the numbers on how these rate hikes could have affected repayments on a 25-year, $500,000 home loan.

Assuming that your lender passed on every single cash rate hike in full to your home loan, and that you are on a variable rate loan, you may have found that your monthly repayments were $1210 more expensive in April 2024 compared to April 2022.

How much more you may have paid on your home loan in 2024

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

Source: RBA average owner-occupier variable rate for existing customers, April 2022. RateCity.com.au. Note: Based on a 25-year, $500k home loan, comparing repayments with RBA average rate in April of 2.86% versus a 7.11% interest rate from CBA’s predicted cash rate peak of 4.35% in 2024. Does not factor in fees.

This is a significant amount for homeowners to find within their already strained household budgets - the equivalent of buying a new iPhone every month! Homeowners may want to take action as soon as possible to accommodate higher repayments, including:

• Making extra repayments to chip away at your loan principal;
• Paying into an offset account or redraw facility to help reduce your interest charges; and
• Refinancing to a lower-rate lender if it suits your financial needs and budget.

The Reserve Bank of Australia has hiked the cash rate multiple times since May 2022, resulting in home loan rates rising across the country. Millions of Australian homeowners are likely asking themselves: when will interest rates fall again?

If you’re looking for the light at the end of the home loan rate hike tunnel, don’t fear. Based on the predictions of the big four banks, we may see interest rates fall again in early to mid 2025. 

Big four bank predictions: when the cash rate will fall again

In good news for homeowners, the big four banks have forecast that three to five cash rate cuts may occur in 2025-2026. According to the latest forecasts from the big four banks, the cash rate may move as follows:

Big four banks’ cash rate forecasts

• CBA: Next cut February 2025, cash rate falling to 3.35% by December 2025
• Westpac: Next cut in May 2025, cash rate falling to 3.35% by December 2025
• NAB: Next cut by May 2025, cash rate falling to 3.10% by June 2026
• ANZ: Next cut by February 2025, cash rate falling to 3.85% by November 2025

Why did rates increase so high so quickly?

The latest cash rate hikes have mostly come as a result of inflation, amongst other macroeconomic factors. Even though the latest quarterly CPI data came in lower than the lowest since March 2021, it is unlikely that interest rate cuts will happen until inflation is clearly moving steadily to the RBA’s ideal level of 2-3%.

However, if inflation can continue to ease, the RBA may choose to keep the cash rate on hold for the time being. This will offer homeowners some much-needed relief in their budget, particularly as it takes at least 20-30 days post-notification letter from your bank to hike your interest rate. 

That being said, it’s important to keep in mind there is no set rule to when the RBA is likely to cut the cash rate again. Conditions could change in a way that favours a lower rate environment sooner, or much later, than predicted. Without a crystal ball it is hard to pinpoint an exact date, so it may be worthwhile keeping up to date with the latest financial news in the meantime.

What global rate movements can tell us

It’s not just Australia’s central bank that has been hiking its benchmark interest rate for some time. Global economic leaders like the UK, the US, the EU, Canada and more, have all experienced increases to their rates as led by their central banks.  

As many of these leaders began hiking rates before Australia, we may be able to look at their behaviour as an indication of how the RBA may move. 

Recently, the Bank of England cut its bank rate to 4.75%, as did the US Federal Reserve. The European Central Bank (ECB) made 25-point cuts to three key interest rates at its most recent meeting.

In Australia, inflation has started to fall into the RBA target band, though there’s more to go. If this continues, we could see the cash rate kept on hold for a little longer, with rate cuts to follow.

Give yourself a rate cut while you wait for rates to drop

Don’t wait around for the economy or the RBA to shift in your favour. These are some of the ways that homeowners may be able to give themselves a rate cut early, including calling your lender.

Keep in mind that not every option will be applicable to your specific financial situation and budget. Interest rates are now much higher than when many home buyers signed up for their mortgage. This means that if you’ve only owned your home for a short period, you may not have built up enough equity to service a new, refinanced home loan.

Make extra repayments

One of the easiest ways to chip away at your principal and potentially reduce the interest charged on your home loan is to make extra repayments – if your budget will allow. 

Not every home loan will let you make additional repayments without charge, so check the product disclosure statement (PDS) before proceeding. Even smaller extra repayments of $50 a week could go a long way over time in reducing your home loan repayments.

Offset account

If your home loan comes with one or more offset accounts, it may be worth utilising this home loan feature. Any funds that you deposit into your offset account can work to reduce, or ‘offset’ the amount of interest the lender charges. For example, a $600,000 home loan with $50,000 in its offset account will see interest charged on an updated balance of only $550,000.

Refinance

If you’re seriously struggling to meet your monthly repayments due to higher interest rates, and you’ve been repaying your home loan for some time and/or have built up considerable equity, it may be worth considering refinancing. 

Switching to a lower rate home loan may offer your budget some much-needed breathing room in a time of rising rates. Further, many lenders offer new customers their most competitive interest rates to encourage them to sign up, so you may find that you qualify for a bargain.

Switch to a lower rate, but maintain higher repayments

This strategy may involve making extra repayments, but it is done so as to not impact your household budget. You will need to call up your lender and ask for a rate cut, or consider refinancing to a lower rate home loan. 

Once you’re on the new, lower-rate mortgage, continue to make the same higher repayments you were making on your old loan. Not only will you help to reduce your loan amount owing, but you won’t need to source extra funds from your budget to do so.

When does the RBA meet in 2025?

• 17–18 February
• 31 March–1 April
• 19–20 May
• 7–8 July
• 11–12 August
• 29–30 September
• 3–4 November
• 8–9 December

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If you’re in the market to buy a property or refinance your existing home loan, compare your January 202 options before selecting a mortgage deal.