After July's RBA rate hold, when do the big banks expect the next cut?
Australian borrowers hoping for further mortgage relief were left waiting this month, as the Reserve Bank of Australia (RBA) held the cash rate steady at 3.85% on Tuesday – defying market expectations of a cut.
Each of the Big Four banks had forecast a 25-basis-point reduction ahead of the meeting, but the RBA held the cash rate steady at 3.85%. The pause follows two rate cuts earlier this year, with the most recent delivered in May.
The decision has led lenders and analysts to revise their expectations for when the next cash rate reduction might occur. According to financial comparison site Mozo, both sticky inflation and, subsequently, the RBA’s cash rate decisions defied expectations last year, leading economists to repeatedly push back their forecasts.
And now that the RBA has made another surprising move this week, major banks are now looking at future monetary policy meetings.
As of July 8, NAB expects the next cuts to arrive in August and November. CommBank also anticipates a cut in August. Westpac has shifted its forecast to November, while ANZ no longer expects any further rate reductions in 2025.
Mozo has compiled the following summary of the Big Four banks’ long-term cash rate forecasts:
The timing of future cuts will hinge on inflation outcomes. The RBA has made it clear that its next moves depend on whether inflation shows signs of easing in the next quarterly figures, due later this month.
Meanwhile, Mozo said borrowers should have already seen some benefit from the RBA’s last rate cut. If lenders passed on the full 25-basis-point drop, Mozo estimates a borrower with a $660,000 loan could be saving around $100 per month, or $1,195 a year, if their rate fell from 6.10% to 5.85%, with homeowners in New South Wales, Queensland and the Australian Capital Territory are expected to gain the most in terms of monthly savings.
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