Rate cut expectations pushed back after inflation surprise
NAB has revised its outlook for the Reserve Bank of Australia’s next cash rate reduction, now predicting the first move will occur in May next year.
The adjustment follows the release of monthly consumer price index data that exceeded expectations. Previously, NAB had anticipated two rate reductions, with the initial cut forecast for November and a subsequent move in February.
In contrast, the other major banks continue to expect a November rate cut, though CBA has cautioned that this outcome is “by no means guaranteed and will be highly dependent on the data flow from here.”
Borrowers are being advised not to assume a rate cut will take place in November. Those seeking lower repayments may need to consider refinancing or negotiating with their lender to secure a better rate.
Analysis from Canstar.com.au indicates that owner-occupiers who have not changed or renegotiated their loan since the rate rises began in 2022 are likely paying a variable rate of 6.36%. Switching to a more competitive rate of 5.25% or less could yield savings of over $12,000 across two years for a $600,000 loan with 25 years remaining, even after accounting for estimated switching costs of $1,150.
“NAB has ripped up its prediction for a 2025 rate cut, pushing the timeline out to May next year following yesterday’s higher-than-expected monthly CPI results,” said Sally Tindall, data insights director at Canstar.com.au. “This has almost certainly popped any chance of a September cut.
“The RBA doesn’t put much weight on the monthly data, but these results are difficult to ignore out of hand and the board isn’t going to take risks with inflation. It’s a stark reminder of how quickly forecasts can change.
“NAB might be right. It also might be wrong, but what this change in forecast is, is a wake-up call that if you want a rate cut before Christmas, you might need to get it yourself. Dropping your variable loan down to a cracking rate could put you in pole position when the RBA does end up firing off another rate cut.”
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