As inflation remains stubbornly high, the Reserve Bank of Australia (RBA) continues to hold its ground on interest rates. Governor Michelle Bullock has made it clear that "it is premature to be thinking about rate cuts" despite financial markets predicting a reduction by the end of the year. Bullock emphasised that "inflation is still too high and, in underlying terms, is not expected to be back in the top of the band until the end of next year."
This stance is echoed by Australia's big four banks, which have all adjusted their predictions for the cash rate, currently sitting at 4.35%. ANZ, NAB, and Westpac now forecast that the cash rate has peaked and expect the first rate cuts to begin in early 2025. Specifically, ANZ and Westpac both anticipate February 2025 as the earliest likely date for a cut, with ANZ predicting rates will drop to around 3.60% by the end of that year. NAB also expects a cut by May 2025, with rates easing to the same level. CommBank remains the outlier, holding on to its prediction of a rate cut in November 2024, with rates eventually falling to 3.10% by the end of 2025.
Westpac’s recent adjustment in mid-August 2024 from a 2024 rate cut to a more conservative February 2025 marks a significant shift in sentiment, leaving CommBank as the only major bank predicting a rate cut this year.
For potential property investors, this means a few important things. Firstly, when rates eventually start to drop, a 25 basis point cut could result in about $150 per month off a $1 million mortgage, if passed on in full. Additionally, such a rate cut can increase your borrowing capacity by tens of thousands of dollars, making property investments more accessible.
However, purchasing an investment property is not something that can be done overnight. It requires careful planning, education, and financial readiness. If you're thinking about buying a property when rates start to drop in 2025, the time to start preparing is now.
The journey to property investment success begins long before the actual purchase. By working with a mentor, you can gain valuable insights, strategies, and the emotional support needed to make informed decisions that align with your financial goals. The Property Mentors are here to help you navigate the complexities of the market, ensuring you’re fully prepared to take advantage of the opportunities that lower interest rates may present in the future.
Don't wait for the rate cuts to begin—start your preparation today. Reach out to The Property Mentors and take the first step towards building a secure financial future.
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