Interest Rate Cuts on the Horizon

With the Reserve Bank of Australia (RBA) set to deliver its next cash rate decision on May 20, attention is turning to how ongoing economic indicators may shape the outcome. Recent data points to easing inflation, softer lending activity, and weakening labour market conditions - factors that have prompted several economists to forecast reductions in the cash rate over the coming months.

At 4.10%, the current cash rate is widely considered to be on the restrictive side, particularly in the context of subdued economic growth and cautious consumer sentiment. Some analysts suggest that moving towards a more neutral rate, estimated between 3.0% and 3.35%, will help rebalance economic conditions, encouraging investment and spending while maintaining control over inflation.

According to the big four banks, the outlook for rate cuts is clear:

CBA: Anticipates rate cuts each quarter, bringing the cash rate down to 3.35% by December 2025.

Westpac: Predicts rate reductions in May, August, and November, resulting in the cash rate settling at 3.35% by the year's end.

ANZ: Predicts three rate decreases, dropping the cash rate to 3.35% by August 2025.

NAB: Expects five rate cuts, including a double reduction in May, leading to a cash rate of 2.60% by February 2026.

What’s Happening in Lending Right Now?

Recent ABS figures show a slight retreat in home lending after a strong 2024 recovery. The March quarter saw a 3.5% decline in new loan commitments, particularly amongst first-home buyers and investors. However, year-on-year growth remains healthy, indicating that the broader lending environment is still stable.

Loan sizes remain at historic highs - $660k for owner-occupiers and $673k for investors nationally, with Victoria’s average sitting at $628k for owner-occupiers. Despite the recent dip, both investors and non–first home buyers continue to show resilience, reflecting long-term confidence.

Refinancing volumes, especially for owner-occupiers, remain high. More Australians are shopping around, eager to secure better rates or switch to more competitive lenders, a pattern that highlights the ongoing significance of strategic finance advice.

What It Means for You

If you are considering buying, selling, or refinancing, the next RBA decision is set to influence the property market’s tempo for the months ahead. Lower rates could improve borrowing power, boost buyer demand, and help sustain stable growth across the housing sector.

Need Advice?

Speak to the Marshall White Finance team for expert guidance tailored to your property goals and financial position. We are here to help you make informed decisions in a shifting market.

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