Will there be a rate cut in 2024? Some of the top rated home loans for November

Australian mortgage holders and prospective home buyers expecting a rate cut might need to wait a little longer. The RBA held the cash rate steady at 4.35% in its November meeting, indicating that a restrictive policy is likely to stay in place for some time. While borrowers may not see relief in the form of a rate cut this Christmas, there is still hope for early next year, with the big four banks unanimously forecasting a cut in February 2025.

In its statement on monetary policy, the Reserve Bank Board reiterated that sustainably returning inflation to target within a reasonable timeframe remains its highest priority. Although headline inflation has shown a substantial decline over the past few months, the underlying inflation continues to remain high.

According to the data provided by the September quarter Consumer Price Index (CPI), headline inflation rose by just 0.2% over the quarter, and annual inflation now sits at 2.8%. This is a significant decrease from the June quarter rate of 3.8%, largely helped by declines in fuel and electricity prices.

However, the Reserve Bank of Australia (RBA) focuses more on trimmed mean inflation when evaluating its next cash rate move. Trimmed mean inflation is a measure that excludes the most volatile price changes, such as fluctuating energy and fuel costs this quarter. This measure offers a more stable view of underlying inflation, helping the RBA to assess longer-term trends rather than short-term fluctuations.

For the September 2024 quarter, annual trimmed mean inflation came in at 3.5%. While this is a slight improvement from 4% in June, it remains outside the RBA’s target range of 2-3%. This level suggests that a cash rate cut is unlikely in the immediate future, with forecasts now pointing to February 2025 as a potential date for the next rate reduction.

Despite no news on immediate rate cuts, mortgage holders can expect some relief early next year with Australia’s big four banks forecasting the possibility of three to five cash rate cuts between 2024 and 2025. The forecasts suggest that the cash rate may decrease gradually over the next two years, with the following projections from each bank:

• CBA: First cut in February 2025, with the cash rate potentially dropping to 3.35% by December 2025.
• Westpac: Next cut in February 2025, with a rate of 3.35% by December 2025.
• NAB: Expected cut by February 2025, with a potential decrease to 3.10% by June 2026.
• ANZ: Expected cut in February 2025, with the cash rate potentially at 3.60% by November 2025.

While you wait for the rates to drop, consider shopping around for a better deal and give yourself a rate cut. If you’re feeling the squeeze on your budget, refinancing to a lower interest rate could offer immediate relief.

However, when considering refinancing, it’s crucial to assess the overall cost of switching. Additionally, borrowers should consider the features and flexibility of different loans, and consider which choices may best suit their unique financial goals and household needs.

RateCity’s Real Time Ratings™ can help you quickly compare the options available to you by combining their cost and flexibility into a single star rating. These ratings are updated frequently, and the top-rated choices are ranked on RateCity’s Home Loan Leaderboards. Some of the top-rated mortgage deals in different categories may also be eligible for a RateCity Gold Award.

(Rankings are correct at the time of publishing. Please note lenders may trade places on the list as interest rates and fees change and RateCity’s tracker reflects these movements.)

RateCity's top-rated home loans with a variable interest rate. Assumes a $400,000 mortgage with a maximum LVR of 80%.

Credit Union SA Ltd Fixed Home Loan Package (Principal and Interest) 3 Years (LVR < 97%) at 5.69% (comparison rate 5.59%)

G&C Mutual Bank Limited Fixed Rate Home Loan 3 Years at 5.70% (comparison rate 5.76%)

Easy Street Financial Services Fixed Home Loan (Principal and Interest) 3 Years at 5.64% (comparison rate 5.79%)

G&C Mutual Bank Limited Fixed Rate Home Loan 2 Years at 5.75% (comparison rate 5.81%)

Bank of Heritage Isle First Home Loan Fixed (Principal and Interest) 3 Years (LVR 80%-95%) at 5.59% (comparison rate 5.85%)

Source: RateCity.com.au. Data accurate as of 06/11/2024.

This is the comparison rate published by the lender and is on a per annum basis. The comparison rate is calculated for a secured loan for an amount of $150,000 over a 25 year term. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.