Financial markets are pricing in four interest rate cuts in 2025, potentially bringing some relief to struggling Australian mortgage holders.
According to the RBA Target Rate Tracker published by the ASX, markets are predicting the RBA will first cut interest rates by 25 basis points in February 2025, with 3 more in the run-up to August.
With four 25 basis point rate cuts, the official cash rate (OCR) would drop from 4.35 per cent to 3.35 per cent.
Head of consumer research at Finder, Graham Cooke, said the ASX’s RBA Target Rate Tracker is indicating a shift in market expectations.
“Four interest rate cuts would offer significant relief to homeowners struggling with rising mortgage repayments,” Mr Cooke said.
“Many households have been feeling the squeeze following 13 rate hikes – a series of rate cuts would save Aussies hundreds of dollars per month on variable-rate home loans.”
Finder analysis shows the average homeowner would save $5,076 per year on their mortgage after 4 cuts
This would mean $423 less a month in the average repayment.
However, Mr Cooke said that even a single rate cut could provide relief.
“Even 1 rate cut could see homeowners paying $107 less per month and nearly $1,300 less a year,” he said.
The potential rate cuts come amid ongoing financial stress for many homeowners.
“Two in five (40 per cent) homeowners struggle to pay their mortgage each month,” Mr Cooke said.
“One in six (17 per cent) homeowners say they have either missed a payment or asked for hardship assistance.”
Despite the positive outlook for homeowners, Mr Cooke said there remains a degree of uncertainty with future economic conditions.
“The ASX is clear on its site that the information is indicative only, meaning that while the market may be pricing in the possibility of four rate cuts, this is not a guarantee that the Reserve Bank will take action,” he said.
“It’s important to remember that these predictions are based on probability, and the future is still uncertain.
He said rate cuts might not benefit homebuyers as much as they think.
“While rate cuts might alleviate some financial pressure on current homeowners, they could also reignite demand in the housing market, potentially driving up property prices again,” he said.
“This would make it harder for first-home buyers to enter the market, even with lower borrowing costs.”
