Mortgage holders in Australia may soon find some relief as financial markets anticipate a cut in the official cash rate by the Reserve Bank of Australia (RBA) during its announcement at 2.30pm today. With a 90% likelihood of a 25 basis point decrease, the cash rate could fall to 4.1%, a shift from the stable 4.35% maintained over the past 15 months following 13 consecutive hikes.
Economists argue that recent declines in inflation provide the RBA with the opportunity to lower interest rates. If a cut is implemented, homeowners will have to wait to see if their banks will pass on the savings. According to financial comparison site Mozo, reducing the cash rate could save an average borrower with a $665,000 mortgage around $104 per month. However, economist Richard Holden notes that it may take four to six weeks for the effects of the rate adjustment to be felt in household budgets.
Additionally, the RBA’s decision is expected to be closely watched by the federal government as Prime Minister Anthony Albanese considers the timing of the upcoming election, which must occur by May. A rate cut could enhance the government’s standing on economic management.