NAB has revised its cash rate forecast, pushing back the timing of the next cut to May next year, on the back of yesterday’s higher-than-expected monthly CPI data.
Before yesterday, NAB expected two further cash rate cuts, the first coming in November, followed by February next year.
Currently, the three other big four banks still expect the RBA to cut the cash rate in November, however, CBA yesterday acknowledged that it was “by no means guaranteed and will be highly dependent on the data flow from here.”
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Current big four bank cash rate forecasts | |||
---|---|---|---|
Bank | Next cut | Total cuts to come in cycle | Cash rate at end of cuts |
CBA | 4 Nov | 1 | 3.35% |
Westpac | 4 Nov | 3 | 2.85% |
NAB | 5 May | 1 | 3.35% |
ANZ | 4 Nov | 1 | 3.35% |
While there’s still a chance the RBA will cut rates in November, borrowers should not take it as a given. If they want a rate cut, the only way to guarantee one is by refinancing to a lower rate or haggling for a rate reduction.
Our analysis estimates that an owner-occupier who hasn’t switched or renegotiated their rate since the start of the 2022 hikes is on a variable rate of 6.36%.
However, if they switched to a competitive rate of 5.25% or less, with a $600,000 debt and 25 years remaining, they could potentially save more than $12,000 over the next two years, even after factoring in estimated switch costs of $1,150.
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Potential impact from refinancing a $600k home loan | |||
---|---|---|---|
Variable rate today | Monthly repayments | Cost – next 2 years | |
Complacent borrower | 6.36% | $3,999 | $73,098 |
Refinance to a competitive rate | 5.25% | $3,595 | $60,973 |
Difference | -1.11% | -$403 | -$12,125 |
Source: Canstar. Notes: calculations are based on an owner occupier with a $600k debt and 25 years remaining. The complacent variable borrower rate assumes the person has not renegotiated their rate since May 2022. Costs include $1,150 in switch costs but not ongoing fees and that variable rates change in line with NAB’s cash rate forecast.
Canstar’s data insights director, Sally Tindall says, “NAB has ripped up its prediction for a 2025 rate cut, pushing the timeline out to May next year following yesterday’s higher-than-expected monthly CPI results.”
“This has almost certainly popped any chance of a September cut. The RBA doesn’t put much weight on the monthly data, but these results are difficult to ignore out of hand and the Board isn’t going to take risks with inflation.
“It’s a stark reminder of how quickly forecasts can change. NAB might be right. It also might be wrong, but what this change in forecast is, is a wake-up call that if you want a rate cut before Christmas, you might need to get it yourself.
“An ultra-competitive variable rate for owner-occupiers is around 5.25 per cent or less, with more than 30 lenders offering at least one of these rates.
“Owner-occupiers sitting on rates above 6 per cent could be throwing away thousands of dollars out of loyalty.
“Canstar research shows that a complacent owner-occupier sitting on a rate of 6.36 per cent with a $600,000 loan could potentially pocket more than $12,000 in just two years by switching to a competitive rate, even after accounting for refinancing costs.
“Yes, it’s a bit of paperwork, but dropping your variable loan down to a cracking rate could put you in pole position when the RBA does end up firing off another rate cut.”
This article was reviewed by our Finance Editor Jessica Pridmore before it was updated, as part of our fact-checking process.
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