Sooner rather than later: ANZ forecast interest rate cut in February
ANZ is now expecting a first interest rate cut within weeks when the Reserve Bank of Australia (RBA) meets in February.
ANZ, which originally predicted a first interest cut in May, has joined the Commonwealth Bank in forecasting the first interest rate cut for next month.
The new forecast follows the “better-than-expected” results of November’s monthly consumer price index (CPI) indicator, which the Australian Bureau of Statistics (ABS) released last week.
The ABS reported a CPI of 2.3 per cent in the 12 months leading to November, which is within the RBA’s target band of 2–3 per cent.
While ANZ and CBA now expect the first cut in February, NAB and Westpac still forecast the first cut to happen in May.
The banks also disagree on the number of cuts that could be made throughout 2025.
The ANZ is expecting two cuts throughout the year, while CBA and Westpac are forecasting four cuts.
Conversely, NAB predicts the highest number of cuts with five drops in the interest rates in 2025.
Independent financial comparison site Canstar data insights director, Sally Tindall, said the likelihood of a rate cut in February is increasing, but nothing can be certain until the RBA meeting.
“All eyes will be on next week’s ABS Labour Force data and the quarterly CPI results released at the end of the month. If core inflation continues along the same trajectory as we saw in the more volatile monthly dataset, then we could well see a rate cut,” Tindall said.
“The RBA knows just how tough it’s been for people with a mortgage. It wants to deliver rate relief as soon as the data allows.”
Based on an owner-occupier paying principal and interest on the RBA average variable rate of 6.33 per cent, and assuming an RBA cut of 0.25 percentage points, Canstar calculated how much mortgage holders could save.
Data showed that borrowers with a $600,000 loan term and 25 years remaining could see their monthly repayments decrease by $92 if one cut occurs.
Under two cuts, the drop in monthly repayments could be $182 and $357 for four cuts.
If five rate cuts happen in 2025, borrowers could see their repayment being cut by $441 monthly for the same loan.
“Just one rate cut could reduce monthly repayments by approximately $92 per month. That’s not exactly in line with winning lotto, but for some households, even this small amount of relief will help them make ends meet,” Tindall said.
“The big question is just how many rate cuts the RBA will end up handing out.”
“If you’ve got a mortgage, be prepared for every possibility,” Tindall concluded.