Interest rates The two words that have been nothing but headaches for the last few years for most mortgage owners and people wanting to enter the property market. It seems, based on recent announcements, that the storm clouds might be dissipating and there is hope on the horizon for reductions in interest rates.
On 30 October 2024, the Australian Bureau of Statistics (ABS) announced some good news for home owners and people wanting to get into the market – the Consumer Price Index (CPI) dropped to 2.8%.
This is significant because it’s the first time since March 2021 that inflation has dipped into the RBA’s sweet spot of 2-3%. A target that the RBA has been telling everyone that we need to hit!
It’s a refreshing change from the previous quarter’s 3.8%, suggesting that those pesky inflationary pressures might finally be easing after a long stretch of high rates.
However, before you start celebrating with a mortgage refinance party, it’s wise to temper your expectations about interest rates.
Experts are advising caution
While the headline inflation figure looks promising, the RBA is still keeping a close eye on underlying inflation which remains above target levels.
Governor Michele Bullock has made it clear that even though we’re seeing some improvement in overall inflation, we need to see core inflation stabilise before any monetary policy changes can happen.
So, while it’s nice to see some positive movement in the CPI, it doesn’t automatically mean that interest rates will drop straight away.
The RBA is likely to take its time in assessing whether these trends are sustainable before making any decisions about cutting rates.
Implications for cash rates and interest rates in 2025
As we look ahead to 2025, financial analysts predict that the RBA will maintain the current cash rate with potential cuts not anticipated until February 2025.
The consensus among economists is that a gradual easing of rates could then begin, contingent upon sustained improvements in underlying inflation metrics.
While there is optimism regarding future rate cuts, the RBA prefers to observe trends rather than react hastily to single data points and is likely to adopt a cautious approach.
This means that borrowers should prepare for a slow transition rather than an immediate drop in interest rates.
Preparing for potential interest rate drops
Given the current economic indicators, mortgage clients should consider proactive measures to position themselves favourably as interest rates potentially decline in 2025.
Here are some steps to take:
Why you should book an appointment with our team now!
As we approach January 2025, it’s advisable to book an appointment with our finance team sooner rather than later.
Here’s why:
While the recent drop in the CPI is encouraging and signals a potential shift in monetary policy, mortgage holders should remain cautious and proactive.
By preparing now and engaging with us, you may position yourself advantageously for the anticipated changes in interest rates throughout 2025.
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There is some good news for interest rates for 2025 with Australian Bureau of Statistics (ABS) recently announcing some good news. The drop in CPI could mean that interest rates could drop in 2025. We explain the news and provide some input into what interest rates in 2025 could look like and how to make sure you are ready to take advantage of the drops when they come.
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