Mortgage holders could be better off by hundreds of dollars a month if the Australian Stock Exchange’s forecast on interest rates is right.
For the first time since the Reserve Bank began its long chain of rate hikes in 2022, the markets are predicting four interest rate cuts in the next 12 months.
The ASX RBA Rate Tracker yesterday showed a market forecast of a 0.25 per cent cut in February next year, with three more leading up to August 2025.
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Assuming all consecutive cuts are the same – 0.25 per cent – that would bring the official cash rate down from 4.35 per cent to 3.35 per cent by this time next year.
Australian Bureau of Statistics data shows the average mortgage sits at $641,143.
A full percentage point drop would see the average homeowner saving $5076 a year on their mortgage, according to comparison website Finder.
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That amounts to $423 saved per month, on average.
“Four interest rate cuts would offer significant relief to homeowners struggling with rising mortgage repayments,” Finder head of consumer research Graham Cooke said.
“It’s important to remember that these predictions are based on probability, and the future is still uncertain.”
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He said falling interest rates could also spark a surge of buying in the housing market, which could once again price first-time buyers out.
“Homeowners on fixed-rate mortgages might not immediately feel the benefits of the cuts. However, those whose fixed terms are ending soon could see better refinancing options when their loans revert to variable rates, helping them avoid the sharp increases many have faced in recent years,” Cooke said.
“Even one rate cut would be a welcome savings for homeowners, with Finder’s Cost of Living Pressure Gauge currently sitting at 80 per cent – in the extreme range, where it has remained for two years.”
Cooke also noted that the ASX predictions were no guarantee the RBA would take action, and that economic conditions could shift quickly.
“Homeowners and investors should remain cautious,” he said.
“If you are sitting on a bad rate now, you don’t need to wait for the RBA to move the cash rate. Finder has 30 variable home loan offers that start with a ‘five’ – if yours does not, it may be time to switch.”
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