Interest Rates Forecast
The major banks have pushed their rate forecast to 2026 following the latest inflation data, joining the other banks in a pessimistic outlook for 2025 interest rates. CBA economists are now predicting February 2026 as the next and final rate cut of this cycle after the latest inflation data from the Australian Bureau of Statistics (ABS) raised some concerns.
Latest Inflation Data
The ABS monthly inflation data for August saw inflation climb to 3 per cent, which was higher than expected and played heavily into the RBA’s decision to hold rates at its September meeting. Economists across the board said this was a significant factor in the RBA’s decision.
Banks’ Predictions
CBA now joins NAB in being more conservative with rate forecasts. NAB recently pushed its cut prediction to May 2026, which means the major bank expects holds at the next four RBA monetary policy meetings. ANZ has also adjusted its stance following the outcome of the RBA’s September meeting, with economists saying the November meeting will pass without a cut. Westpac is the last of the major banks that believes there could be a rate cut at the November meeting, but economists also said the current base of a cash rate cut in November is far from assured.
Impact on Borrowers
If the major banks’ economists are anything to go by, it could be months before borrowers are treated to reduced interest rates. Industry figures have urged brokers to be proactive in engaging borrowers in discussing refinancing options to alleviate some financial strain. According to a Canstar study, a borrower with a $600,000 mortgage could save $403 per month by refinancing from a 6.36 per cent rate to a competitive 5.25 per cent rate.
Refinancing Options
The study also found that if the borrower continued to pay the same amount as they did on their previous loan, they could potentially save $225,620 over the life of their mortgage and pay it off 5 years and 3 months early. Sally Tindall, data insights director at Canstar, urged borrowers to take control of their mortgage, saying refinancing does involve some paperwork, but the numbers show it’s a game-changer.
Conclusion
In conclusion, the latest inflation data has led to a pessimistic outlook for 2025 interest rates, with major banks pushing their rate forecast to 2026. Borrowers may need to consider refinancing options to alleviate financial strain, as it could be months before interest rates are reduced. By taking control of their mortgage and exploring refinancing options, borrowers can potentially save thousands of dollars and pay off their mortgage earlier.
