RBA holds cash rate again - when will we see cuts?

The Reserve Bank has again left the cash rate at 4.10 per cent, announcing today a pause for the third meeting in a row and a fourth time this year.

This pause is yet another indication the cash rate has already peaked, however Governor Philip Lowe, in his last statement as Governor of the Board, noted some further tightening of monetary policy may be required.

When can we expect cash rate cuts?

Incoming RBA Governor Michelle Bullock has noted she is hesitant to give any sort of guidance on how long interest rates would have to stay high, however, the economic teams from the big four banks are all predicting at least one cut next year, with the earliest forecasted cut from CBA in March 2024.

Big four banks’ current cash rate forecasts:

Note: forecasts are subject to change within next few days as National Accounts data is released.

What borrowers should do?

Borrowers should concentrate on clearing another potential hike, rather than focusing on potential cuts that may or may not materialise next year.

One of the most effective ways to do this, is to refinance to a different lender, particularly for those who haven’t switched banks since the start of the hikes.

Alternatively, borrowers can haggle with their current lender to get a better rate, even if they’ve haggled or refinanced relatively recently.

According to the RateCity database, there are still three lenders offering variable rates under 5.50 per cent, while 33 lenders are offering variable rates under 5.75 per cent (excludes introductory rates).

If someone with a $500,000 debt switched to one of the lowest variable rates in the market they could potentially save $12,024 in the next two years, even after paying an estimated $1,150 in switch costs.

How much could you save by renegotiating your loan when compared to ‘do nothing’

Based on $500,000 debt with 25 years remaining - contact us for other loan sizes

Source: RateCity.com.au. Note: Big four bank average includes Westpac’s introductory rate. LVR requirements apply.

Lowest ongoing variable rates available on RateCity.com.au database

Source: RateCity.com.au Note: Fire Services Credit Union loan limited to emergency services professionals and their families in South Australia only. LVR Requirements apply. Excludes introductory rates.

RateCity.com.au research director Sally Tindall, said: “All four big bank economic teams have cuts forecasted in 2024, but the number and timing of these cuts vary significantly.”

“CBA is predicting the first cut in March while ANZ believes the cash rate won’t move south until late 2024. That’s a huge difference for anyone with a mortgage,” she said.

“A watched pot never boils. If you’ve got a mortgage, put your head down and come up with a budget that will withstand another rate hike, rather than a rate cut.

“If and when a cut does finally come your way, you can be pleasantly surprised.

“The RBA and the government can’t hand out widespread relief to borrowers at this stage. If they do, they risk triggering another spike in inflation. If you need to inject relief into your budget, you’re going to have to be proactive about it.

“Even if you’ve haggled or refinanced in the last 6 to 12 months, ask again. The banks are still in the mood to hand out discounts, particularly if they think you’ve got itchy feet,” she said.

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