{"id":5441,"date":"2024-06-20T10:05:48","date_gmt":"2024-06-20T00:05:48","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5441"},"modified":"2024-06-20T10:05:48","modified_gmt":"2024-06-20T00:05:48","slug":"rate-cuts-pencil-them-in-for-2025","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/rate-cuts-pencil-them-in-for-2025\/","title":{"rendered":"Rate cuts? Pencil them in for 2025"},"content":{"rendered":"
June saw the Reserve Bank of Australia (RBA) keep the cash rate on ice \u2013 yet again.<\/p>\n Rates haven\u2019t budged since November last year, and with the RBA not due to make another rate call until\u00a0August<\/a>, interest rates will remain in a holding pattern for at least two more months.<\/p>\n For home owners struggling to manage their home loan at current interest rates, it begs the question: \u2018what happened to all the talk about rate cuts in 2024?\u2019<\/p>\n Here\u2019s what\u2019s happening.<\/p>\n Just a few months ago, some of our biggest banks were predicting interest rates would start to slide sooner rather than later.<\/p>\n The\u00a0Commonwealth Bank<\/a>\u00a0and\u00a0Westpac<\/a>, for instance, expected rate cuts as early as September.<\/p>\n That\u2019s now looking increasingly unlikely.<\/p>\n The reason lies with inflation.<\/p>\n The\u00a0RBA is intent on getting inflation down to 2-3%<\/a>.<\/p>\n Unfortunately, inflation is not playing along.<\/p>\n It\u2019s\u00a0currently sitting at 3.6%<\/a>. So close, but not quite there.<\/p>\n The RBA expects it could be \u201csome time yet\u201d before inflation is happily nestled in that 2-3% range \u2013 the point at which long-awaited rate cuts may start to kick in.<\/p>\n It\u2019s not much of a date for home owners to work towards, though the big banks have a few time frames of their own.<\/p>\n Westpac<\/a>\u00a0and\u00a0NAB<\/a>\u00a0now both see rates heading south from December. And while\u00a0CommBank<\/a>\u00a0recently stated it expected rates to fall in November, there are signs it\u2019s losing hope for a 2024 rate cut.<\/p>\n \u201cGiven 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,\u201d CBA\u2019s head of Australian economics, Gareth Aird, said.<\/p>\n \u201cThe risk to our call is increasingly moving towards a later day for an easing cycle.\u201d<\/p>\n Meanwhile,\u00a0ANZ<\/a>\u00a0doesn\u2019t expect a rate cut before 2025. Ditto\u00a0Citi economists<\/a>\u00a0and a growing number of\u00a0other experts<\/a>.<\/p>\n Long story short, even if we do get a December 2024 RBA rate cut, it\u2019s probably fair to say we won\u2019t see those cuts flow through to home loans until early next year.<\/p>\n And a note of caution: the RBA mentioned in its June statement that it is \u201cnot ruling anything in or out\u201d.<\/p>\n It\u2019s a grim reminder that a rate cut is not guaranteed before another rate hike.<\/p>\n This is why it\u2019s so important to take action of your own.<\/p>\n Revisiting your household budget, identifying areas where you can cut back, and tucking spare cash into an offset account to save on loan interest are all steps worth considering.<\/p>\nPut the party pies on ice and postpone those rate-cut celebrations for a while yet. The much-touted rate cuts we\u2019ve been waiting for may not arrive until 2025. Here\u2019s why rates could be staying higher for longer, and how to take action yourself.<\/strong><\/p>\n
One reason why rates aren\u2019t moving<\/h3>\n
When are rates likely to fall?<\/h3>\n
How to manage higher rates<\/h3>\n