Will There Be a Drop in Interest Rates? – November Rate Report

It’s the first week of November, and the Reserve Bank of Australia (RBA) board has unveiled their second last cash rate decision for the year.

The RBA has seen increasing pressure to drop the cash rate in the last year, as inflation and cost of living have made owning property or trying to enter the property market, stressful for many Australians. As homeowners grapple with high interest rates, November has brought hope of a cash rate cut

While there was some speculation that November would finally see a cash rate cut, it appears the RBA is making us wait a little longer, as they have announced the cash rate will stay put at 4.35%, at least a little longer.

The cash rate was last raised this time last year, meaning it’s been sedentary for a full 12 months now, at a record high we haven’t seen since 2011 [1] (Stevens, 2011).

Globally, inflation is finally moving in the right direction, with countries like the United States lowering their rates – recently cutting to 4.25% in September [2](Cranston 2024). Despite this, Australia’s inflation is lagging behind this global shift. According to the International Monetary Fund’s projections, Australia’s inflation rate will remain among the highest in the world – second only to Slovakia out of the 42 countries surveyed [3] (IMF, 2024).

However, just last week inflation fell within the RBA’s Target band, landing at 2.8%[4] (Hannan, 2024), which is the lowest its been in over 3 years, so why hasn’t the RBA decided to cut the cash rate? It’s been forecasted by both the RBA and IMF to peak in 2025 before falling within the target range. This means that a cash rate cut – and relief for Aussie homeowners may be further off than anticipated [5] (Hutchens 2024).

What Does This Cash Rate Decision Mean for Homeowners?

If you own a home and are on a variable-rate home loan, expect the interest on your repayments to stay the same – at least for the time being. It’s worth contacting your local MoneyQuest broker to assess your refinancing options, that may help move you to a more competitive rate. Right now, locking in a fixed rate is something you probably want to avoid. Exercise with caution, as when interest rates do start to drop, a fixed rate could leave you paying more than necessary.

What Does This Cash Rate Decision Mean for Homebuyers?

With interest rates currently high and property prices rising nationwide, it may be worth waiting However, this will depend on your borrowing capacity, property goals, and budget. Some experts place us in the boom stage of a property cycle, meaning it can be a favourable time for buyers to seize their opportunity and get a leg up in market. Find your closest MoneyQuest Broker for a zero cost, commitment-free consultation, to see if it’s the right time for you to buy.

Should I Prepare for a Cash Rate Cut?

Some experts are predicting a cash rate cut soon – either December or February next year [5] (Duncan, 2024), however there is no concrete ruling, and recent predictions have frequently changed.

Whatever the future holds, it’s important to know we’re here to help. Whether it’s repricing, refinancing, or finding you a home, the MoneyQuest team is here, reach out today and find out what’s possible.

[1] Stevens, Glenn. Statement by Glenn Stevens, Governor: Monetary Policy Decision, Reserve Bank of Australia. 1st November 2011. Read 5th November 2024.

[2] Cranston, Matthew. Slam dunk’: Fed cuts rates by half of a percentage point, Australian Financial Review. 19th September 2024. Read 5th November 2024.

[3] Inflation rate, average consumer prices, International Monetary Fund. 2024. Read 5th November 2024.

[4] Hannan, Peter. Australia’s annual inflation sinks to 2.8%, the lowest rate in more than three years, increasing chance of rate relief, The Guardian 30th October 2024. Read 5th November 2024.

[5] Hutchens, Gareth. Stop the presses! The IMF’s forecasts for Australia’s inflation now match the Reserve Bank’s, ABC. 23rd October 2024. Read 5th November 2024.

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