Homeowners hoping to start the new year with a little extra money have been dealt a devastating blow when one of the country’s big four banks warned that a rate cut is still six months away.
The National Australia Bank – and its main rivals – had leaned The Reserve Bank of Australia would cut the official cash rate at its first meeting of 2025 in February.
But the NAB revised its forecast at the end of this week, saying He now believed the central bank would hold off on cutting rates until at least May.
“The labor market has been stronger than expected and the RBA remains concerned about the upside risks to inflation if the gradual cooling of the labor market stops and capacity growth remains sluggish,” the NAB said in its policy. updated monetary policy published on Thursday.
«On September 30 we advanced our rate forecast until a first cut in February.
‘We did so hoping that a better balance of risks around the inflation outlook would mean that a rate cut would be seen sooner.
Australian homeowners could have to hold out for six more months before seeing a rate cut.
The National Australia Bank had initially forecast a decline in February, but revised its forecast.
‘Although the CPI data for the third quarter were as expected, we have been surprised by the resistance of the labor market indicators.
“It remains our view that the unemployment rate will rise slightly further before stabilizing around 4.5 per cent by mid-2025, broadly in line with the RBA’s November forecast.”
The NAB’s revised forecast will not be welcomed by the Albanian government, which had hoped inflation would be brought under control and rates lowered before elections scheduled for May next year.
The RBA has one more meeting this year, then three in the first half of next year: February 17-18, March 31-April 1 and May 19-20.
The central bank has said it needs the cut inflation rate to be consistently in its target range of 2-3 percent before a rate cut occurs.
While headline inflation for the September quarter was 2.8 per cent over the year – within the central bank’s target range of 2 to 3 per cent – this was largely due to government energy subsidies and fuel.
The underlying inflation rate seen by the RBA was 3.5 per cent.
Those struggling to make their mortgage payments have not had a break in four years
Despite NAB’s gloomy prediction, Australia’s other big four banks (Commonwealth, Westpac and ANZ) are still forecasting a rate cut in February.
Regardless of when the RBA decides to make cuts, the announcement will mark the first easing of monetary policy since November 2020.
The RBA is yet to budge on its policy, having raised rates 13 times between 2022 and 2023 and keeping the rate at 4.35 percent for an entire year.
Canstar data analytics director Sally Tindall said while it might seem like a small review by NAB, if the bank was right it could end up costing homeowners thousands of dollars.
“Our research shows that the average owner-occupier with $600,000 in debt and 25 years remaining could end up paying almost $2,000 extra in interest over the next two years as a result of rate cuts starting in May, as opposed to February,” said. .
‘This change is a good reminder of how many balls are still up in the air at this stage, particularly for a data-reliant central bank.
‘If you have a mortgage, don’t trust a rate cut until it hits your bank account. If you want a rate cut sooner, get it yourself by haggling or refinancing.
Tindall warned homeowners not to get too stressed (or excited) about any forecast until the RBA makes an official announcement.
Data analytics director Sally Tindall says it’s hard to rely too much on long-term forecasts
“The new year may be fast approaching, but the timing of the first cash rate cut is still incredibly grey,” Ms Tindall said.
‘Unemployment has remained stable for three consecutive months, giving the RBA the green light to keep the cash rate at 4.35 per cent, for now, particularly given that core inflation is still well above target from the bank from 2 to 3 percent. band.
“At this stage, it is difficult to see the RBA cutting rates as its first point of activity in 2025.
‘The board will likely want to see at least two more rounds of favorable quarterly inflation data before cutting the cash rate.
“If the RBA starts cutting the cash rate in February or May it may seem minor in the grand scheme of things, on a decent sized mortgage it can add up.”
High mortgage rates and rising property prices have made most homes unaffordable for the average Australian.
The latest employment figures, released on Thursday, showed Australia’s unemployment rate held steady at 4.1 per cent for the third month in a row.
The figures found that the country had added about 15,900 jobs to the economy in October, fewer than economists had forecast.
The next inflation figures will be published on 27 November, followed by retail trade figures on 2 December and GDP figures on 4 December – all key data for the RBA board to consider.