Experts predict onslaught of rate cuts: How much could you save?
Economists think the cash rate could sit between 3.35% and 3.60% by the end of this year.
The financial turmoil off the back of US President Donald Trump's tariffs has completely changed some of the predictions around rate cuts this year.
Just last week when the RBA announced it would be holding the cash rate, I wrote that experts were predicting 2 or 3 more rate cuts for 2025. But this week, economists are not only saying there could be possibly be 4 cuts, but that May might even see a bumper 0.50% decrease.
For some more in-depth background and analysis you can read this article. But here, we'll take a look at the latest predictions and what that means for your home loan repayments.
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Even before the tariffs threw everything into chaos experts were predicting that May would see a rate cut. There was another predicted for August, but beyond that it was uncertain. Now, 3 out of 4 of the big banks are predicting 3 more rate cuts but NAB has gone even further in predicting 4 more.
NAB: "We now see the RBA easing more quickly through mid-2025 taking the cash rate to 2.6% by February. We expect the RBA to cut by 50 basis points in May, followed by 25 basis points in July, August, November and February."
ANZ: "Given the likely impact of the tariffs on global growth, as well as those already evident on markets, ANZ Research expects the RBA to lower the official cash rate in May, July and August, by 25 basis points at each meeting. That would see the cash rate at 3.35% come August."
AMP: "Interest rates are likely to fall further this year and the growth threat from tariffs increases the need for rate cuts. We expect the cash rate to decline to 3.6% by the end of this year and to end the cutting cycle at 3.1%. The large falls in global sharemarkets from US tariffs and the potential hit to global growth means that larger and faster rate cuts could occur in coming months and a 50 basis point rate cut can't be ruled out at the May meeting."
HSBC: "As a result, we see the RBA cutting by 25bp at its next meeting in May (previously July) and following this up with three more cuts over subsequent quarters taking the cash rate to 3.10% by early 2026 (previously we saw it falling to 3.60% by then)."
What can you expect to happen to your home loan?
Here's the thing, even if the RBA does cut the cash rate, that doesn't mean it's going to be reflected in your home loan rate.
Even as recently as the rate cut in February, Virgin Money and Bank of Queensland Specialist chose not to pass on the rate cut. CBA, ANZ and NAB all gave customers 'the option' of reducing their interest rate, but chose not to automatically cut rates for customers.
And if we look at the period between June 2019 and March 2020, the cash rate was cut by 1.25%. Out of the big 4 banks, ANZ passed on the most of those cuts, but that was still an overall cut of only 0.97%. Westpac passed on the lowest amount, with an overall cut of 0.80% over those 8 months.
In contrast, when rates were rising in 2022 and 2023 the banks passed the 3.25% increase on in full.
Borrowers could still save thousands
Let's go with the more conservative prediction of 3 more rate cuts this year, including the 0.50% in May. That's a cut of 1%.
The Australian Bureau of Statistics (ABS) has the average home loan value in Australia as $665,978. Using the average interest rate from the RBA of 6.2% and a 30 year loan term, current home loan repayments would be $4,079.
Assuming those cuts, the average would fall to more like 5.2%. This would make those repayments $3,657 a month. That's a monthly saving of just above $422 a month.
Even if banks only pass on half of the rate cuts, that's still just over $200 a month.
The thing is, there are lower rates than that RBA average right here on Finder. So if you were to refinance to the lowest rate available (5.69%) then you could only be paying $3,451 if all the rate cuts were passed on.
Want to get ahead of the rate cuts? Compare refinancing home loan rates now.
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