How high will rates go? Here's what experts think about the RBA cash rate

Will interest rates rise in 2024?

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

Source: RateCity.com.au, big bank cash rate forecasts as of 29/11/2024. 

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 find that your monthly repayments were $1210 more expensive in April 2024 compared to April 2022.

How much more you may pay on your home loan in 2024

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.

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