RBA hold: No rate cut under the tree this Christmas
The RBA has met for the final time this year and... nothing has changed.
The RBA has officially quashed any optimism of a 2024 rate cut by announcing the cash rate will remain at 4.35%.
Although many economists had speculated earlier in the year that we were very likely to have a rate cut by the end of 2024, sticky inflation and a stubborn reserve bank board means we're now (hopefully) looking at 2025 instead.
Those economists which were once so optimistic about a rate cut all predicted in Finder's RBA survey that today would be a hold, so the decision is actually not that surprising.
But, inflation has dropped. So why has the RBA made this decision?
Rate hikes were a way for the RBA to bring the consumer price index (the measure of inflation) from the 7.8% high it was at in December 2022. The RBA wanted that number to be between 2% and 3% instead.
The latest figures show the annual CPI is now at 2.8% - perfect! Well, not quite.
As with anything in the economy, there's more to it than that. When you adjust that inflation rate to remove particularly volatile prices, the "trimmed" inflation figure is more like 3.5%.
What does 2025 look like for homeowners?
The rate hikes have already put a lot of pressure on to households. 47% of homeowners are facing mortgage stress according to Finder's Consumer Sentiment Survey, so there's not a lot more they can take.
Experts in Finder's panel are now predicting that rates will drop in the first 3 meetings of next year (February, April and May). 24% also believe there will be a second cut in 2025.
With a home loan of $500,000 on the average variable interest rate of 7.08%, you could see your monthly repayments drop by $84 if the rate dropped by 0.25%.
If you are near that average variable rate though, you may be able to get a lower rate even before a rate cut.
Check out the interest rates available with refinancing loans.