Only last week (18 June), we saw the Reserve Bank of Australia (RBA) announce the cash rate would remain unchanged, yet again.
The cash rate hasn’t changed since November 23 and given the RBA isn’t due to make another decision until August, the cash rate will remain as-is, on ice, at least until 6 August.
But what happened to all the predictions about rates falling in 2024? Why haven’t we seen interest rates fall yet?
In a word?
Inflation.
The RBA is determined to see inflation sitting at 2-3%. It’s currently a little higher than this at 3.6%, so there’s a little way to go.
When will interest rates fall?
Ah, the question that never elicits a straight-forward answer!
The RBA advises it could be “some time yet” before inflation is sitting where they want it to be. Until then, we’re unlikely to see rate cuts kick in, which doesn’t really provide much of timeline for homeowners to work with.
Both Westpac and NAB are predicting rates will head downwards in December 25.
CBA had previously stated it expected rate cuts as early as November 23, but recent commentary from CBA’s head of Australian economics, Gareth Aird, suggest this position may be changing:
“Given the challenging underlying inflation backdrop, as well as a labour market that is loosening more gradually than expected, the runway is shortening between now and November…. The risk to our call is increasingly moving towards a later day for an easing cycle.”
ANZ doesn’t expect rates to fall before 2025, a sentiment supported by a growing number of economic experts.
A word of warning
It’s important to remember that when/if rates start to fall, it will take some time for the effect of this to flow through to your repayments.
Not only that, but depending on the size of the cash rate cut – and then the size of the rate cut actually passed on by your lender – the impact to your monthly cashflow may not be all that significant.
Secondly, the RBA states that it is, “resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”
This is a very firm reminder that a rate cut isn’t guaranteed, nor is a rate hike completely off the table either.
What can you do about high interest rates in the meantime?
All the strategies we’ve talked about previously, are still good ways to manage higher-than-ideal interest rates and loan repayments.
For example, things like: reviewing the household budget; cutting back on discretionary spending; using your offset account properly; undertaking a home loan review are all things you should be doing now.
If you would like some help to get your household finances back under control, get in touch with our team today.
This post was published on 20 June 2024.
