Borrowers should take matters into their own hands as Governor Bullock all but rules out a rate cut this year

Borrowers should not bank on a rate cut in 2024, but instead plan for a potential hike as the RBA kept rates on hold for the sixth consecutive meeting at 4.35 per cent.

While the Board is once again refusing to rule anything in or out, Governor Bullock confirmed that a rate cut in the near future was highly unlikely, based on current data.

Borrowers should take this warning on board and plan for another hike before the end of the year. 

Impact of another 0.25% pt rate hike before the end of 2024

Based on an owner-occupier variable borrower paying principal and interest

Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest on the average variable owner-occupier rate of 2.86 per cent at the start of the hikes. Assumes the borrower has not renegotiated their rate since the start of the hikes and that the rate hike is in November.

Refinancing the key to unlocking rate relief

Many variable rate borrowers are already under extreme pressure under the weight of the previous 13 RBA rate hikes – pressure that is unlikely to be relieved this year unless they take action themselves. 

RateCity.com.au research shows that a variable rate owner-occupier who has copped the full 4.25 percentage points of cash rate rises is currently on an estimated rate of 7.11 per cent. 

However, RBA data shows the average variable rate owner-occupier is actually on a rate of just 6.37 per cent. This means they have talked their way out of around three standard RBA hikes. 

Mortgagors should not stop there. The RateCity.com.au database shows there are 28 lenders offering at least one variable rate under 6 per cent to owner-occupiers looking to refinance.

How much could borrowers save by renegotiating their rate?

If a complacent borrower with a $600,000 debt renegotiated with their bank down to the average rate of 6.37 per cent, they would see their monthly repayments drop by $280 and potentially save as much as $4,441 over the next 12 months. 

If they refinanced all the way down to a rate of 6 per cent, they would see their monthly repayments drop by $417 and save $5,509 in the next 12 months, even when including an estimated $1,150 in switch costs.

This assumes there is one rate cut in the next 12 months in May of next year.

Impact of renegotiating or refinancing the mortgage

Based on an owner-occupier with $600,000 debt 

Source: RateCity.com.au. Note: based on an owner-occupier paying principal and interest with 25 years remaining and a current debt of $600,000. Assumes there is one rate cut in May 2025 and no rate hikes in the next 12 months. Refinancing option includes $1150 in switch costs.

RateCity.com.au research director, Sally Tindall, said: “The message from Governor Bullock is crystal clear – cash rate cuts are not on the cards in the near term.”

“If you want mortgage relief this year, you’ll need to go and get it yourself,” she said.

“It might mean switching to a lender you haven’t tried out before, but if it brings ongoing relief to an overstretched budget, the switch is likely to be worth it.

“While the next move for the cash rate is still, on balance, likely to be down, not up, borrowers should plan for another rate hike, just in case.

“We know that the RBA considered the possibility of another rate hike at the August meeting, and that it’s likely to contemplate it again at the next one.

“When it comes to the mortgage, it pays to plan ahead by making sure your budget can handle another hike. 

“If the numbers stack up, it will give you peace of mind you can tackle the next few months head on. If they don’t, you’ll have time on your side to work on a plan B,” she said.

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