In its final meeting for the year, the Reserve Bank of Australia (RBA) announced that the official cash rate will remain unchanged at 4.35% for December. This marks the ninth consecutive decision to keep rates steady, as the central bank gains confidence that inflationary pressures are easing.
A Year of Stability
The cash rate has remained steady for over a year since its last increase in November 2023. Economists widely anticipated this decision as the RBA continues its efforts to bring inflation back within its target range of 2-3%. Encouragingly, recent data indicates progress: the consumer price index (CPI) returned to the target range for the first time in over three years in the September 2024 quarter. However, measures of underlying inflation still sit at 3.5%, suggesting there is work to be done.
According to the RBA’s November Statement on Monetary Policy, inflation is not expected to sustainably reach the midpoint of the target range until 2026. Despite this, RBA Governor Michele Bullock highlighted optimism, stating, “Our forecast suggests that growth will start to pick up as real disposable incomes increase over the coming year, and that inflation will continue to decline.”
What This Means for Borrowers
While the RBA’s decision may not feel like the festive gift borrowers hoped for, it provides an opportunity to prepare for the anticipated rate cuts in 2025. Industry leaders are advising mortgage brokers and borrowers alike to plan ahead.
One industry leader noted, “With the likelihood of rate cuts in the coming year, brokers need to proactively manage and communicate with their customers. Consumers will be looking to reduce their mortgages once there is movement, and brokers should be ready to assist.””
Another expert echoed this sentiment, urging brokers to stay connected with their clients during this period of transition. They emphasized that the RBA’s caution is understandable, given the impact of factors such as government energy rebates, which have temporarily eased inflation.
Looking Ahead to 2025
Major banks have adjusted their forecasts for the first rate cut, with most now predicting it will occur in May 2025. However, the Commonwealth Bank (CommBank) remains an outlier, forecasting a cut as early as February 2025, provided inflation data supports such a move.
For brokers, the anticipated rate cuts represent both a challenge and an opportunity. Another industry figure advised brokers to leverage this time to prepare for shifting market conditions, stating, “Clients will have questions about how these changes affect their financial decisions. Brokers who stay close to their clients and provide tailored advice will be best positioned to guide them.”
A Resilient Market
As we head into 2025, the focus remains on stabilizing inflation and navigating a high-interest-rate environment. The RBA’s decision to hold rates reflects a cautious but optimistic outlook, with potential rate cuts on the horizon. For borrowers and brokers, preparation and proactive communication will be key to navigating the shifting landscape effectively.
Don’t wait for rate cuts to begin planning your financial future. Whether you’re looking to reduce your mortgage or explore other financial opportunities, now is the time to act. Contact us today to discuss how you can stay ahead of the market and make informed financial decisions for 2025.