Mortgage Broker What If We Finance predicts interest rate cuts in 2024. After reviewing expert and economist research What If We Finance Mortgage Broker Melbourne believes interest rates may be reduced by September 2024. This will provide welcome relief to home loan borrowers. In the mean time home loan borrowers should continue to try and negotiate better rates on their home loans.
Expert interest rate predictions
Experts are predicting that the Reserve Bank of Australia will cut interest rates starting in September 2024 , with the cash rate holding at a 12-year-high of 4.35% for most of the year before providing relief to borrowers.
However, interest rate reductions in Australia will trail behind the US Federal Reserve, the European Central Bank, and the Reserve Bank of New Zealand.
This delay could lead to an increase in the Australian dollar, as investors seek higher interest rates than those offered in the US. If the bond market’s prediction is accurate, the Fed will ease six times this year, beginning in March, with expectations that the Australian dollar will rise to US70¢ by December 2024, from its current value of US68.1¢, according to economists surveyed by The Australian Financial Review.
Despite a labour market with a 3.9% jobless rate and high inflation in the services sector, with petrol prices at an average of $2.03 a litre in Sydney and $2.04 in Melbourne, there are signs of improvement. The RBA is projected to begin cutting rates in September, according to The Australian Financial Review’s survey of 40 economists.
The economy has averted a hard landing, and house prices have surged, leading to a wide range of financial market predictions throughout 2023. Some economists doubt that the RBA’s tightening cycle is over. The former RBA official and Challenger chief economist, Jonathan Kearns, questions whether the RBA will raise rates in February or be influenced by expectations that other central banks will ease. He believes the RBA should tighten in February.
Inflation is Easing
Australia’s consumer price index rose 5.4% in July-September and 4.9% on the new monthly consumer price indicator in October, according to the Australian Bureau of Statistics. The RBA expects the increase in prices to slow to 2.9% by December 2025, which is almost two more years of it evading its target range of 2% to 3%.
The RBA will have eight meetings in 2024, reduced from 11, starting in February, following an independent review ordered by the Treasury. One challenge for the RBA may be population growth, with 500,000 migrants arriving in the past year. Moody’s senior economist Katrina Ell stated that while the influx was helping address labour shortages, it was also contributing to inflationary pressures. She predicts the first rate cut will occur sometime in the September quarter.
The RBA’s tightening cycle is the fastest in a generation, having raised interest rates by 4.25 percentage points since May 2022. Consequently Home Loan Affordability has deteriorated sharply.
Work with your mortgage broker
Potentially this represents good news for home loan borrowers as What If We Finance expects home loan affordability to improve slightly if home loan interest rates are reduced.
In the meantime borrowers should continue to perform home loan health checks and work with their independent mortgage broker to ensure they have the best deal. Contact What If We Finance to find out more.