Home loan watch: when will interest rates finally come down? Expert forecasts explained

By Jack Dona · · 3 min read
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Key Points

  • The next cash rate decision is on 24 September 2024.
  • Interest rates will decrease when inflation reaches the 2% to 3% RBA target band, predicted for late 2024 or early 2025.
  • Home loan interest rates have already started to drop, including some Big Four rates. 
Collage of a woman walking down a descending graph line.

The Reserve Bank of Australia (RBA) maintains that its number one enemy is inflation. If inflation stays high, so will home loan interest rates.

But with many households on the edge of mortgage stress, more rate rises in 2024 are the last thing Australians want. So instead, let’s think long-term, optimistically.

When will interest rates finally come down?

Will home loan interest rates go down in 2024?

On 6 August 2024, after announcing yet another cash rate hold, Governor Michele Bullock told the press that the RBA doesn’t expect to make any cuts in 2024. 

“I think what the Board’s feeling is that the market path at the moment is pricing in interest rate reductions by the end of this year. 

“I think the Board’s feeling is that the near term, by the end of the year and the next six months, given what the Board knows at the moment and given what the forecasts are that that doesn’t align with their thinking about interest rate reductions at the moment,” said Bullock. 

Unfortunately, this means mortgage rates will stay at atmospheric heights until we finally hit the RBA’s inflation goal, which is a flexible target of 2-3% per year. 

Once we do, the central bank will steadily unwind the cash rate to get the economy moving again. Variable home loans will come down significantly and monthly mortgage repayments will ease, which could make servicing a mortgage easier for many Australians.

RBA cash rate cut forecasts from Westpac, NAB & CommBank (27 August 2024)

Sep 24
Dec 24
Mar 25
Jun 25
Sep 25
Dec 25
Mar 26
Jun 26
Sep 26
Dec 26
Westpac
4.35%
4.35%
4.10%
3.85%
3.60%
3.35%
3.35%
3.35%
3.35%
3.35%
NAB
4.35%
4.35%
4.35%
4.10%
3.85%
3.60%
3.35%
3.10%
3.10%
3.10%
CommBank
4.35%
4.10%
3.85%
3.60%
3.35%
3.10%
N/A
N/A
N/A
N/A

Economists at ANZ predict the RBA’s first cut will come in February 2025. 

ANZ, NAB & Westpac rule out interest rate cuts in 2024 – new prediction for early 2025

For a while, ANZ was the only one of the Big Four banks predicting the RBA would hold the cash rate at 4.35% until the end of 2024. Now that NAB and Westpac have revised their forecasts to early 2025, CBA is the only hold-out still believing there could be a cut in November-December 2024.

Is the proof in the fixed-rate pudding?

Now that home loan lenders have sensed a lull in the rate-hike cycle, many have started cutting their fixed and variable rates – including some of the Big Four.

Mozo banking and rates expert, Peter Marshall, says these fixed-rate cuts could indicate the conviction the Big Four have in their interest rate predictions. 

"Fixed rates are shaped by lenders’ forecasts of where interest rates are headed,” he said.  

“Since these rates stay the same for the fixed rate term, and banks aim to balance the returns from loans with the cost of deposits, there’s a chance fixed rates will be higher than variable when the cash rate drops.

“Choosing a fixed rate today could be tempting, but borrowers should also consider the likelihood of upcoming rate cuts by the RBA before making their decision."

The Big Four home loans that have moved in recent weeks include NAB’s Tailored Home Loan (Fixed), Westpac’s Fixed Options Home Loan, and CBA’s Fixed Rate Home Loan (Wealth Package), variable rate Extra Home Loan, and Standard Variable Rate. 

But fixed-rate cuts aren’t only coming from the Big Four. There have been a whole host of banks and home loan lenders cutting interest rates this month, including Newcastle Permanent, Great Southern Bank, Macquarie, MOVE Bank, and ME.

How can homeowners save mortgage costs?

While interest rates stay up, mortgage repayments will, too. If you’re struggling with the loan you already have, making lifestyle changes, calling your lender, and investigating whether to refinance can all be good options for handling mortgage pain. The best path for you will depend on your situation. 

However, if you’re hoping to buy a home despite the inflationary environment, consider these three ways to break into the property market – all while checking your application for these lending red flags. 

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Last updated 8 September 2024 Important disclosures and comparison rate warning*

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