It’s the question on everyone’s lips as we start to feel the pinch of the steady rise in home loan interest rates over the last 12 months. As a Perth mortgage broker, we really noticed an increase in activity after the last cash rate rise in May, signalling that homeowners are recognising the need to pay close attention to their interest rate and their overall financial position. After a period of historical lows, the steep and consistent hikes have caused most Australian borrowers to start looking at their options more than ever before.

It’s little wonder that borrowers are starting to feel more cautious than usual, since the cash rate has increased a whopping 11 times since May 2022. With the current cash rate in Australia sitting at 3.85% and inflation not comfortably under control, everyone wants to know when will home loan interest rates come down? How many more rate rises can we expect?

While it’s never a straightforward answer that anyone can accurately predict, here’s a summary of predictions both from the big 4 banks themselves and from a range of Australian economists.

When do the big four banks think rates will go down?

ANZ: Late 2024
ANZ expects one more rate hike of 25 basis points in August that will see the cash rate peak at 4.10%. ANZ forecasts the first rate reduction of 25 basis points will happen in November 2024, expecting the first rate reduction of 25 basis points, taking the cash rate back to 3.85% (what is currently is now).

Commonwealth Bank: Late 2023
Commonwealth Bank suggests the May rate hike was the last we will see in this cycle. CBA predicts the cash rate will drop by 50 basis points in the last quarter of 2023, followed by more rate cuts in the first half of 2024 resulting in the cash rate sitting at 2.85% by June 2024.

NAB: Early/mid 2024
NAB expects another rate hike in July or August which will see the cash rate rise peak at around 4.1%. NAB believes we will see cash rate coming down in the second quarter of 2024 and predicts the cash rate will sit at 3.35% by the middle of the year.

Westpac: Early 2024
Westpac believes the cash rate has now peaked and expects it to remain at 3.85% for the rest of 2023, before falling by 25 basis points to 3.60% by March 2024. Westpac predicts rate cuts of 25 basis points will continue on a quarterly basis until the end of 2024, where the cash rate will sit at 2.85%.

What do other financial experts think?

Again, there is no set formula for predicting when home loan interest rates will come down or go up for that matter, but here is a range of opinions from professionals spanning economic and real estate industries. The general consensus is that we will see the cash rate start to come down sometime in 2024, whether it is early, mid or late year is a point of contention.

Mark Crosby: 2024

The first thing to remember when considering the timing of interest rates falling is the fact that rates are still at historically extremely low levels.
There is some debate about what a ‘normal’, or as economists would call it, a ‘neutral’ rate of interest is, but through most of history, the range for the neutral rate would be 4%-6% for a low-risk asset. In other words, rates are still at very low levels and have some way to go before returning to a more normal range.

During 2023 rates will return to a more normal level, around this 4% mark. From this point, the factors that would make the RBA cut rates – leading to more widespread cuts in rates – would be a fall in inflation back to the low end of the RBAs 2%-3% target range, or a recession.

Globally there is a significant recession risk, but of course, this is hardly good news for households. There is reasonable hope that inflation will fall this year, though the evidence on this remains mixed. As inflation starts to fall the pressure on the RBA to continue raising rates lessens.

The key factors with respect to inflation falling are a leveling off or fall in energy prices and a normalisation of global supply chains. On both fronts there are risks, with the war in Ukraine and China’s policies to reduce reliance on trade causing inflation risks to remain.

Overall, I am hoping that the RBA is not cutting rates before 2024 as rate cuts in 2023 are likely to be the result of bad economic news.

Dr Mark Crosby is an applied macroeconomist and the Director of the Bachelor of International Business at Monash Business School.

Leanne Pilkington: Mid-2024

The pause in April was only a brief reprieve as the RBA went against the consensus to increase rates again in May. While it is hoped the latest increase will be the last in this cycle, it is not certain, and therefore the timeframe for a downward correction remains unclear.

What we do know is that the increases to date have had a significant impact. The economy has slowed and there are signs that inflation is easing too. Nevertheless, the situation remains delicate, which makes forecasting difficult.

The scenario for many mortgage holders is delicate too. It’s little consolation for owner-occupiers and investors whose repayments have risen considerably in recent times to remind them that historically, rates are still low.

Housing affordability, including the rental shortage, is one of the community’s major concerns. The price of homes, particularly during the pandemic boom, required many people to commit significant finances in order to buy. Many secured finance on a fixed-term basis and lots of those loans will soon expire.

These people need to prepare now and find out what their repayment obligations will be. From the RBA, they crave certainty that rates have topped out. For these people, on the plus side, it appears the house price cycle has reached the bottom with a rebound evident.

At this stage, the best-case scenario in terms of home loan interest rates trending back down is perhaps mid-2024. If the RBA views containing inflation as its most important job, then this will remain the key figure to watch. For many, the tough going continues.”

Leanne Pilkington is CEO of real estate group Laing+Simmons. She is also Deputy President of the Real Estate Institute of Australia.

Tina Teng: Early 2024

“The RBA is expected to continue rate hikes in the coming months due to sticky inflation, a tight labour market, and resilient economic development, though the first quarter CPI shows early signs of declining.

The newly released Budget pushes the RBA to skew hawkish as the government’s subsidy to low-income households tends to inflate demands and put upside pressure on the consumer price. The supportive policy for first home buyers may cause a further rebound in housing markets and worsen inflation.

However, the global environment warns of a risk if RBA pins on rate hikes for too long. The US regional banks’ crisis will likely ripple globally if things get fluid. The event may have brought forward the timing for the central banks to peak their rate hike cycles as the Fed signaled to pause raising rates in the next meeting, though it will be an economic data-dependent decision. Further, China’s reopening progress seems bumpy, given the sluggish April imports and deflated CPI data, which clouds Australian exports’ outlooks.
Hence, I expect the RBA to start a rate-cut cycle in early 2024.” 

Tina Teng is a Markets Analyst for CMC Markets APAC & Canada.

For those looking to review their interest rate to investigate any potential cost savings, most of the larger banks are currently advertising variable interest rates at about 5.6%, but there are cheaper home loan interest rates available in the market, so please get in touch to see what we can do for you.

Want to talk about your borrowing options with a Perth mortgage broker? Contact us to get an idea of the best home loan interest rates Perth lenders are offering this week.

All lending subject to status and lenders criteria. Terms & conditions apply. This document contains general information only. Your own personal circumstances have not been considered and you should seek independent financial advice prior to making any decision on a financial product.

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