Major bank's $350 win for mortgage holders amid interest rates forecast: 'Huge relief'

Yahoo

a day ago

Westpac has added two more interest rate cuts to its Reserve Bank of Australia (RBA) forecast following a lower inflation outlook. If the major bank's predictions are correct, mortgage holders could receive hundreds of dollars in monthly repayment relief.
Westpac continues to expect two cash rate cuts this year, in August and November, with a further two added early next year, in February and May. This would bring the cash rate down to 2.85 per cent.
Westpac chief economist Luci Ellis said the latter of the two rate cuts could be earlier, in December and February, or February and March, if inflation and the labour market turn out weaker in late 2025 than expected.
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'That would mean RBA cash rate will bottom out at 2.85 per cent, from a peak of 4.35 per cent, and 3.85 per cent currently. We regard the cash rate at 2.85 per cent as being at the lower end of the 'neutral range',' Ellis said.
Three of the Big Four banks expect the RBA will cut the cash rate by 0.25 per cent at its August meeting, leaving rates on hold in July.
NAB is the only major bank to predict a back-to-back July interest rate cut, however, Commonwealth Bank has noted it is a 'live' meeting.
Canstar calculated that a 0.25 per cent cut would reduce monthly repayments on a $600,000, 25-year mortgage by $90.
If Westpac's forecast of four cuts through mid-next year plays out, homeowners would see a total drop of $349 a month.
Canstar data insights director Sally Tindall said this would be a 'huge relief' for households under pressure, but cautioned that it was just a forecast, not a given.
'While the timing of the next cut is still up in the air, the prospect of at least one more is, at this stage, likely,' she said.
'The RBA won't hesitate to act in July should global volatility ramp up, but the more likely scenario is that it will sit tight until after the June quarter CPI results, due out at the end of next month.
'Borrowers shouldn't be banking on multiple rate cuts just yet, but they can start preparing by shopping around for a better deal, particularly if, as an owner-occupier, their variable rate starts with a '6'."
While markets are expecting an interest rate cut at the RBA's next July meeting, not all economists agree.
Ellis said she doesn't think the 'disappointing GDP data' or upcoming data flow would be enough to tip the RBA into cutting next month.
'The May labour force data out next week is likely to show a labour market that still looks tighter than the RBA's view of full employment,' she said.
'And while the May monthly CPI indicator, to be published on 25 June, is likely to be a low one, the steer from April and May suggests that June quarter CPI is likely to be a bit above what the RBA is forecasting.'
The Australian Bureau of Statistics (ABS) revealed last week economic activity had grown just 0.2 per cent in the March quarter, down from 0.6 per cent in the December quarter.