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Commonwealth Bank delivers good news to every Australian with a mortgage

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The Commonwealth Bank has finally delivered some good news for Australians with mortgages, predicting the Reserve Bank of Australia will cut interest rates at its next meeting in February.

The Commonwealth Bank anticipates that the Reserve Bank of Australia will reduce the official cash rate at its next meeting in February 2025.

The revelation comes after the bank’s Household Spending Reporting Index recorded a 7.7 per cent drop in discretionary spending, reinforcing the view that Australian consumers continue to struggle.

Increases in essential categories such as utilities, insurance and transportation were offset by a sharp drop in spending on household goods, which plunged 8.3 percent.

Combined with falling inflation, the pullback in spending reinforced the CBA’s view that the Reserve Bank of Australia will cut interest rates at its next meeting in February, Halmarick said.

It is no longer an atypical opinion among the big four banks. ANZ recently brought forward its rate cut prediction to February due to lower-than-expected inflation figures for November.

As a result, Halmarick revised down its core inflation forecast for the December quarter to 0.5 percent, due to be released on Jan. 29, which would put the six-month annualized core inflation rate near the midpoint of the RBA target range at 2.6 percent. .

It predicts the central bank will cut rates by 100 basis points over the course of 2025, beating market expectations of around 60 basis points of cuts.

Banks have different predictions on the number of rate cuts expected in 2025, with ANZ being the most conservative and forecasting two cuts, while CBA and Westpac anticipate four and NAB projects five.

The Commonwealth Bank has finally delivered some good news for Australians with mortgages, predicting the Reserve Bank of Australia will cut interest rates at its next meeting in February.

If there were five rate cuts, a borrower with a $600,000 loan and 25 years remaining could see their monthly payments decrease by as much as $441.

That would weigh even more on the Australian dollar, which has fallen to nearly five-year lows against its U.S. counterpart in recent days.

With just two rate cuts, the same borrower could save $182 a month on their payments.

The rate cuts could further weigh on the Australian dollar, which has fallen to near five-year lows against its US counterpart in recent days.

But the spread between market expectations and what actually happens with the cash rate won’t have too big an impact, given that the main driving force behind the exchange rate has been the strong performance of the dollar, Halmarick said.

“Over the year, the dollar averages around 61 or 62 cents, very close to where it is today, but we have said the risk to that forecast is a move down to 60.”

Canstar’s director of data analytics, Sally Tindall, said to “prepare for any possibility.”

‘The big question is how many rate cuts the RBA will end up delivering. “If you have a mortgage, be prepared for all possibilities,” he said.

“A rate cut in February is increasingly likely, however, with more than five weeks to go until the next Board meeting and the RBA firmly focused on incoming data, this could change.”

Consumer spending fell 1.8 percent in December after an increase in November, and financially strained households adapted their shopping habits to prioritize sales periods.

CBA chief economist Stephen Halmarick said moderate spending could mean an early rate cut

CBA chief economist Stephen Halmarick said moderate spending could mean an early rate cut

Shoppers clearly brought forward Christmas spending to take advantage of sales activity, said CBA chief economist Stephen Halmarick.

“When those sales periods don’t exist, things really disappear quite quickly,” he told AAP.

“Overall, consumer spending remains fairly subdued.”

The bank’s index derives spending information from de-identified payment data of around seven million retail customers.

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