NAB says the next cash rate move will be down, not up, but not until 2025

The National Australia Bank has updated its cash rate forecast, pushing the first projected cash rate cut out by six months to May 2025.

The bank previously expected the first cut would be in November of this year, with five cuts in total taking the cash rate to 3.10 per cent by December 2025.

Yesterday, NAB economists updated the bank’s forecast, moving the first cut back to May 2025.

The bank is still expecting a total of five cuts, with four more cuts scheduled for each quarter until the cash rate reaches 3.10 per cent in mid-2026.

NAB cash rate forecast

Source: NAB

At this stage, all four big bank economic teams still believe the next move from the RBA will be down, rather than up, despite yesterday’s shock inflation figures.

ANZ amended its forecast earlier in the month, moving back the timing of the first cash rate cut to February 2025, while CBA and Westpac still currently expect the first cut will be November of this year.

Current big four bank cash rate forecasts

While the big four banks are still expecting the next move from the Board will be a cut, not a hike, a growing number of economists believe the RBA could increase the cash rate as early as its next meeting in August.

Plan for a hike, not a cut

Borrowers should start preparing their budgets for the possibility of not just one, but two more rate hikes before the year’s end, just to be on the safe side.

For an owner-occupier with a $500,000 debt at the start of the hikes and 25 years remaining, two more rate hikes would add around $150 extra on to their monthly mortgage repayments.

If the borrower had not renegotiated their rate since the start of the hikes, two more 0.25 percentage point rises would translate into a total increase in monthly repayments of $1,360 since May 2022.

Impact of two more potential RBA hikes before Dec 2024

Based on an owner-occupier who has not renegotiated their rate since the start of the hikes

Source: RateCity.com.au. Notes: based on an owner-occupier paying principal and interest with 25 years remaining at the start of the hikes on the average variable rate back in April 2022 of 2.86%. Assumes cash rate increases are in August and November 2024 and that banks pass them on in full.

RateCity.com.au research director, Sally Tindall, said: “The big bank economic teams all currently expect the next move from the RBA will be down, not up, but if you’ve got a mortgage, plan for the exact opposite.”

“The latest inflation data from the ABS serves as a sharp reminder of just how close the potential of another rate hike actually is,” she said.

“Even if there were no further hikes, rate relief in the form of an RBA cut is moving further into the horizon.

“If NAB’s current forecast eventuates, borrowers will not see any rate relief from the RBA for almost a year.

“If you want to see your repayments go down, you need to make it happen yourself.

“There are 28 lenders on the RateCity.com.au database offering at least one variable rate under 6 percent to refinancers.

“Find out what you are eligible for and either make the switch, or use that information as ammunition when you talk to your bank,” she said.

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