Interest rate forecast: when will rates go up in Australia?

In February of this year, the Reserve Bank of Australia (RBA) cut the cash rate for the first time since 2020. The 25 basis point cut brought the cash rate down to 4.10%, and the bank held the rate at this level at its subsequent board meeting, before another 25 basis point cut in May, to the current level of 3.85%.

While a further cut was broadly expected in July, the board of the RBA took economists by surprise by holding the cash rate steady at its last meeting, an unwelcome piece of news for variable-rate borrowers who were hoping for further mortgage relief. So, what will happen with interest rates for the rest of the year?

Given that trimmed mean inflation is now officially back in the RBA’s target band at 2.9% per annum for the March quarter, another rate hike does not appear to be on the horizon, but this doesn’t mean that more cuts are going to happen either, as inflation will likely need to remain stable for the central bank to consider lowering the cash rate further.

The first few months of 2025 saw refinancing ramp up in Australia, with 100,000 home loans refinanced in the first three months of the year, representing the highest level in more than 18 months. With rate hikes seemingly behind us for now, it seems many Aussie home loan borrowers are looking to ease the mortgage pain of the last few years.

Could we see even more rate movement this year? We’ll find out the RBA’s next move when the board makes its next announcement on Tuesday July 8.

What do the major banks say about future cash rate hikes?

ANZ predicts a 25 basis point cut in August and another in November, taking the cash rate to 3.35% by the end of 2025.

CommBank predicts a 25 basis point cut in August and another in November, taking the cash rate to 3.35% by the end of 2025.

NAB predicts 25 basis point cuts in August and November, and another in February, taking the cash rate to 3.10% by the beginning of 2026.

Westpac predicts 25 basis point cuts in August and November, and another in February, taking the cash rate to 3.10% by the beginning of 2026.

How to ease the pain on your mortgage

There are ways you may be able to pay off your home loan quicker than planned. For example, paying more than the minimum required, or switching from calendar monthly to fortnightly payments can help you reduce the outstanding amount on your loan faster.

You can use our extra repayments calculator to see how that could affect your home loan.

If you’re worried about the impact of any rate rise on your home loan repayments, you might want to consider reviewing your loan. A good place to start is by researching what other rates and loans are on the market, via a comparison website such as Canstar.

Armed with this information, you may choose to discuss with your lender what options may be available, such as fixing all or part of your loan. If you’re in a position to do so, you could also consider asking them for a lower rate, citing examples of other rates on offer.

You may also want to consider switching lenders to take advantage of a more competitive deal, including any refinance offers. But refinancing could involve the payment of fees, so it’s a good idea to read all important documentation, such as the Target Market Determination (TMD) and Key Facts Sheet, before making a decision.

Of course, any rate rise, while bad news for mortgage and other loan customers, would be good news for savers.

Anyone with savings in an interest bearing account will likely be looking for greater return on their money but borrowers will be keen to keep their repayments low, and that’s the challenge the RBA faces every time it meets to consider changing the cash rate.

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