Mortgage holders are keenly anticipating the Reserve Bank of Australia’s (RBA) upcoming meeting, where a cash rate cut is predicted for the first time in five years. The RBA will announce its decision on interest rates at 2:30pm tomorrow, with many economists forecasting a reduction of 25 basis points, bringing the cash rate down to 4.1 per cent.
While there’s considerable optimism, some experts, like John Kehoe from the Australian Financial Review, advocate for caution, suggesting there’s only a 60% chance of a cut. He believes any reduction would provide minimal relief to mortgage holders and the ongoing housing shortage, possibly boosting confidence and construction costs slightly, but not significantly affecting home building in the near term.
The cash rate has been steady at 4.35 per cent since November 2023, and with inflation decreasing within the RBA’s target, there is room to lower rates. If a cut occurs, the impact on borrowers will depend on whether banks choose to pass on the reduction. Furthermore, the RBA’s decision will be closely observed by the federal government as Prime Minister Anthony Albanese considers election timing; an interest rate cut could bolster his government’s economic credibility. Homeowners could see substantial monthly savings from a successful cut, potentially more than $100 for average loans.