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

Key Points

• The next cash rate decision is on 7 May 2024, predicted by many to be a hold.
• Official interest rates will come down when inflation reaches the RBA target band of 2% to 3%, most likely in November 2024.
• Inflation is gradually decreasing in 2024.
• Home loan interest rates have already started to drop.

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?

Inflation is predicted to slow down to the RBA's target band in late 2024, unless there are any upsets. Until then, the RBA will hold the cash rate steady and keep monetary policy as tight as possible for as long as possible. 

Unfortunately, this means mortgage rates will stay at atmospheric heights until we finally hit the RBA’s inflation goal.

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 (24 April 2024)

UPDATE: On 24 April 2024, Westpac pushed back its prediction of the first RBA cut to November 2024, two months later than its previous September prediction.

CommBank also pushed their prediction back to November, according to a CBA economist on the ABC's The Business on Wednesday 24 April. 

At the time of updating (24 April 2024) NAB has not changed its prediction. However, we'll keep this page up to date when we hear from them. 

ANZ does not actively publish this information.

CommBank has the RBA making a faster series of cuts than Westpac. NAB predicts a gradual series of cuts starting December 2024. 

There is some good news. Now that home loan lenders have sensed a lull in the rate tightening cycle, many have begun cutting their fixed and variable rates. While rates are still high, they're not as high as they have been. So, unless something else happens, we are likely passed the mortgage peak. 

The timing of rate cuts has a lot of ‘if’, however. Even the most hawkish estimates spread the inflationary slowdown to somewhere between 2024 and 2025 – a full three years after it first took off.

Since our brand of inflation has been primarily supply-side, not demand-driven, quite a few things outside the RBA's control have to go right first. 

Inflation is like acceleration on a speeding car. Our driver, the RBA, will have to keep its foot on the brake (the cash rate) long enough to slow us to a nice pace, but not long enough to stop us cold. They also have to slow us down without crashing us (i.e. cause a recession).

If we hit a recession in 2024, then we could expect the RBA to cut interest rates ASAP, but at the moment, a recession isn't looking likely. Unemployment is going up, but by economic standards it's "normalising" after a few years of more Australians having jobs than usual.

In short? Expect interest rates to stay relatively high until we ease off the brake, most likely somewhere in the window of September to December 2024. 

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. 

Compare low-interest rate home loans below.