Introduction to Interest Rates
Australian homeowners have been dealt a blow as three of the nation’s biggest banks have ruled out any further RBA cash rate cuts in this cycle. This decision has significant implications for borrowers, who were hoping for cheaper repayments.
The Current State of Interest Rates
ANZ has reversed its forecast, joining Commonwealth Bank and National Australia Bank in predicting the cash rate will remain on hold throughout 2026. Westpac is the only major bank expecting two further cuts in May and August next year. With inflation moving in the wrong direction and unemployment falling back to 4.3 per cent, there is no case for a further rate cut in the near term.
Expert Predictions
Canstar’s Consumer Pulse Report found that 66 per cent of borrowers are prepared for rates to remain on hold in 2026, with 34 per cent either not prepared or not sure. The RBA is expected to keep rates on hold when it meets next week on December 8 and 9. While the RBA is unlikely to start hiking rates without notice, if inflation continues to move in the wrong direction, the next move from the central bank could be up rather than down.
Term Deposit Rates
Term deposit rates have continued to rise, with 34 banks increasing at least one term deposit rate in November. This suggests that the predicted future of the cash rate is uncertain. Variable borrowers should take matters into their own hands, whether that’s refinancing to a more competitive lender or haggling with their existing bank.
Borrower Preparedness
Borrowers seeking rate relief should look for a competitive rate. The lowest fixed rate remains steady at 4.64 per cent, while the lowest variable rate is 4.99 per cent. For those savers looking to lock in a term deposit rate, it’s essential to shop around and find a competitive deal. Laddering can be one way to keep options open, locking in smaller pots of money at different times.
Expert Insights
Aussie finance experts have weighed in on future cash rate moves, with all 35 panellists surveyed expecting the RBA to hold the cash rate on Tuesday. Almost all experts said the RBA should hold the cash rate next week, while just 6 per cent believe the Bank should deliver a final hike to close out 2025.
The Future of Interest Rates
As for what’s in store for the next 12 months, economists appear to be evenly split. Half of experts believe rates have hit the bottom of this easing cycle, while the other half said there was still room for rates to fall. There is also uncertainty over October’s CPI reading of 3.8 per cent and whether this will impact the likelihood of a rate hike in the next six months.
Conclusion
In conclusion, the RBA’s decision to hold interest rates has significant implications for borrowers and savers. With inflation moving in the wrong direction and unemployment falling, it’s unlikely that there will be any further rate cuts in the near term. Borrowers should seek out competitive rates and consider refinancing or haggling with their existing bank. Savers should shop around for term deposit rates and consider laddering to keep their options open. As the future of interest rates remains uncertain, it’s essential to stay informed and seek professional advice to make informed decisions.
