Will the RBA hold the cash rate in March 2024? Home loan predictions from CBA, ANZ, NAB, and Westpac

Last month the Reserve Bank of Australia (RBA) held the cash rate at 4.35% for the third consecutive Monetary Policy Decision. 

Mozo finance expert, Peter Marshall, says there’s a general consensus holding the cash rate in February was the right move and that previous rate hikes may have already succeeded in driving inflation down. 

“There’s general agreement that not moving in February was the right thing to do,” he said. 

“As things have panned out over the last few weeks, it’s becoming more apparent that the rate hikes they’ve already delivered may well be enough to do the job of getting inflation down. 

“There’s even a chance that might happen without too much excess unemployment and pain for people.”

So, will the next RBA meeting on 18-19 March 2024 make it the fourth consecutive hold, or are we in for something else?

The consensus amongst the experts, including those at CBA, ANZ, NAB, and Westpac, is that the RBA will hold again in March. 

Marshall agrees, adding that key economic indicators make a strong case for another hold. 

“They have not quite gotten the assurance that they’re looking for in achieving their targets, but there’s plenty of information coming through that suggests that key indicators, such as spending, borrowing, and employment are all showing that the rate hikes are making a difference. 

“So, I don't think they’ll be looking to hike again and they will definitely see it as too early to start cutting.” 

The Big Four Banks are all in agreement that the March meeting will deliver another hold, leaving the cash rate unchanged at 4.35%. 

Big Four Bank cash rate predictions – 13 March 2024

Official interest rates will decrease when the RBA is convinced that inflation has returned to its target band of 2 to 3%. 

The latest annual CPI figure suggests headline inflation is at 4.1%. This is a sharper drop than the RBA predicted but still means we have a while to go. 

Predictions from the Big Four Banks on when interest rates will come down aren’t consistent. However, they typically point to September/December this year for the first cash rate cuts. 

It’s assumed the cash rate will be brought down to 2 to 3% sometime in 2025, but nothing in life (or economics) is guaranteed.  

When interest rates will come down – 14 March 2024

While there’s a good chance home loan borrowers will have to wait it out for another few months before they see any rate relief, Marshall argues that the first cuts could come sooner than the end of the year. 

“I expect that we’ll see central banks in Europe and the United States moving more around the middle of the year,” he said. 

“While it may not be likely that the RBA will follow at that time, I think there’s a decent chance that they will. So, my money would be on sooner, rather than later.” 

Marshall says the things that are prompting the banks overseas to make these changes are occurring in a fairly similar way in Australia. 

“Inflation in other countries is coming down rapidly – there are signs it’s a little bit harder to shift in Australia, particularly with the housing issue.

“The RBA could be looking at what is going on with inflation in other countries and seeing that, well, Australia’s probably going to be coming down to that kind of level sooner or later, too.

“There are lots of different things going on, but at the moment Australia is pretty much moving in the same direction as those larger economic zones.”

While home prices continue to balloon, affordability issues are compounded by rising interest rates. Here’s a look at how changing rates have blown up the average mortgage repayment spend:

What can borrowers do right now to ease the strain of home loan repayments? 

If you have a home loan and are looking for ways to get it down, your main options will be to refinance or use an offset account – or both. 

First off, you can compare home loans with the ultimate aim of refinancing.

Marshall says: “Have a look at what other rates might be available to you from either the lender that you’re with, or other lenders, and have a look at how much you could save by switching. 

“There are so many free mortgage repayment calculators around. Just hop onto one of those and put in the two different interest rates with the amount that you’ve got borrowed, and see how much you could save,” he said. 

While Marshall concedes refinancing can be a bit of a pain, it really comes down to how much work you’re prepared to put in to save money. 

A home loan with an offset account could also ease the burden of larger interest bills, according to Marshall. 

“If you’re not using an offset account at the moment and you regularly have some spare cash flowing through your household economy, it might be worth activating an offset account or seeing how much you can get one for, and making use of that. 

“Because every bit of money you’ve got sitting in there – even for weeks or a couple of months – will help reduce your interest bill.”

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