Struggling borrowers might finally catch a break with an interest rate cut potentially on the cards as early as next month—if everything falls into place.
According to Canstar’s data insights director, Sally Tindall, the Reserve Bank of Australia (RBA) will be closely watching a couple of key indicators. First up is the new labour force data due this Thursday, followed by the quarterly Consumer Price Index (CPI) results arriving in a little over two weeks.
"If the trimmed mean inflation gets close to the top of the RBA's target range and services inflation shows real signs of improvement, we could see the Board cut the cash rate as early as February,” Tindall explained.
Interestingly, she noted that banks might start shifting fixed rates later this month as the RBA's February decision becomes clearer.
"So far, it's been a pretty quiet start to the year,” Tindall said, pointing out that no lenders have changed rates this week. The only exception was the Bank of China, which made minor rate cuts last week.
But if the RBA does cut the cash rate, the banks are expected to respond quickly.
"Competition among low-cost lenders is likely to heat up the moment rates drop,” Tindall added. “Borrowers will start looking for the best deals, and lenders won’t want to miss out.”
Even a small cut—say 0.25 percentage points—could make a noticeable difference. Tindall said it could bring the average new customer variable rate, currently at 6.24%, below the six percent mark for the first time since August 2023. Meanwhile, the lowest variable rate (excluding introductory offers) could dip to around 5.5%.
"For borrowers weighed down by higher interest rates, this could mark the beginning of a much-needed easier year ahead,” she said.
For now, all eyes are on the data and the RBA’s first meeting back from the summer break. If the numbers line up, February could bring some welcome relief.
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