CPI monthly indicator holds steady at 2.1%

The monthly Consumer Price Indicator has clocked in at 2.1 per cent in the 12 months to October 2024, holding steady for the second month in a row. This is the lowest reading since July 2021.

Once again, leading the charge was cheaper electricity prices, as well as lower fuel costs and reduced rents, as a result of rental assistant packages.

Trimmed inflation, the RBA’s preferred measure, printed at 3.5 per cent in October, up from 3.2 per cent in September.

Removing volatile items and travel, however, the monthly indicator measured 2.4 per cent in October, down from 2.7 per cent in September.

Monthly CPI Indicator: ABS

Source: ABS monthly CPI indicator

Today’s results show inflation is moving in the right direction. However, the RBA has made it clear that they would need to see “more than one good quarterly inflation outcome” before they would consider putting a rate cut back on the agenda. 

That means waiting until at least the February 2025 Board meeting. 

The big four bank economic teams are now split on the timing of the first cash rate cut in 2025, with CBA and ANZ predicting the first cut to come as early as February 2025, while Westpac and NAB expect the first cut to come later in May 2025.

Current big four bank cash rate forecasts

Borrowers should break the holding pattern themselves

Australians have not been sitting idle since the first cash rate hike in May 2022.

RateCity.com.au analysis of RBA data shows the average owner-occupier on a variable rate has negotiated or refinanced their way out of three standard cash rate hikes – or 0.77 percentage points.

Interestingly, current big four bank customers have fared better on average, with the analysis showing these owner-occupier variable rate customers have managed to wind back 0.79 percentage points worth of rate rises.

Average owner-occupier variable rate: pre-hikes vs today

Source: RateCity.com.au, RBA outstanding variable rates

How much could you save by renegotiating?

If the average owner-occupier with a $500,000 mortgage and 25 years remaining knocked 0.77 percentage points off their rate, they could save around $2,600 in the next year in interest charges.

If they played hard ball with their bank, or switched lenders to one offering a rate under 6 per cent, the potential interest saved would increase to around $4,300.

Savings from renegotiating the mortgage

Based on an owner-occupier on a variable rate paying principal and interest with $500,000 debt and 25 years remaining

Source: RateCity.com.au. Assumes borrower is an owner-occupier paying principal and interest with a $500,000 debt and 25 years remaining and has not renegotiated their mortgage since the start of the hikes. Assumes mortgage rates change in line with the cash rate forecasts from CBA, that the banks pass the cuts on in full and that the cash rate remains at 3.35 per cent thereafter. Includes $1,250 switching costs. 

RateCity.com.au money editor, Laine Gordon, said: “Monthly CPI has clocked in at 2.1 per cent in October, while this is encouraging, it won’t be enough to move the needle.”

“The Reserve Bank Board has made it clear it will need to see more than one good quarterly inflation data before it’s willing to put rate cuts back on the agenda,” she said. 

“That means waiting until at least the February 2025 meeting, and even then, it may not be the silver bullet they need to pull the trigger on a rate cut.

“With the RBA in a holding pattern until early next year, potentially longer, borrowers should seek out rate relief for themselves. 

“Our analysis of RBA data shows the average owner-occupier has managed to talk their way out of more than three standard cash rate hikes through renegotiating or refinancing their home loan. 

“What’s more incredible is that there are people out there negotiating much bigger cuts.

“If you’ve not haggled with your lender recently, now is the time to take matters into your own hands. A 10-minute phone call to your lender could potentially save you thousands of dollars over the next 12 months alone. 

“Go into the conversation knowing that the average owner-occupier is currently paying a variable rate of 6.34 per cent. However, there are thousands of borrowers on much lower rates than this. 

“The RateCity.com.au database shows there are more than 40 lenders offering at least one variable rate under 6 per cent. 

“Don’t settle for average, get yourself a rate that is exceptional – the savings are better off in your pocket than your banks’,” she said.

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