If you’re a homeowner struggling with repayments due to high interest rates, there may be good news on the horizon. The Australian Bureau of Statistics’ data on trimmed mean inflation reported a .3 per cent drop between October and November [1]. This data is the preferred measurement of the RBA. Falling inflation suggests we may see the cash rate cut earlier than expected, with interest rates expected to follow. This news will hopefully give hope to homeowners, who have been patiently waiting for interest rate cuts for over two years.
High interest rates are used as a countermeasure to reduce consumer spending. When inflation is high, interest rates will usually meet to counter it. Falling inflation typically means that interest rates are doing their job. When inflation stays low, rates are more likely to reduce. You can read more about their relationship here.
February has always been a popular projection for when we may see the first cash rate cut with some experts considering the chance of a cut in February to be a coin flip [2].
Recent political shifts, however, such as the United States President-Elect Donald Trump’s Tariff policy[3], had three of the four major banks move their projections back to May .
However, the report of trimmed inflation, alongside the Consumer Price Index resting below 3% since September, has data analysts saying the first cash rate decision of 2025 will more likely be a cut than not.
This is welcome news for both homeowners who have been struggling with high-interest repayments on their mortgages, as well as potential homebuyers, waiting for a drop in the market. A cash rate drop in February would coincide with a recent dip in national home prices, signifying the property market switching to favour buyers.
While inflation, property prices and hopefully interest rates are projected downward, other household costs are less clear. Grocery prices are expected to stay high in 2025 [4]. This depends on the ACCC’s probe into Australian supermarket’s price gouging practices. The ACCC’s findings could potentially drive prices down based on their findings, although nothing is guaranteed. In terms of electricity costs, the ACCC is also advising consumers to “shop around” to ensure they aren’t paying too much on their power bill, with more than 80% of Australians able to move to a cheaper rate if they change their plan[5].
Eyes will be on the RBA to see if they choose to cut rates on February 18th. If they don’t choose to reduce the cash rate, we’ll still be expecting to see one this year, whether in May, July, or later in the year.
If you’re looking to buy a home, reduce your mortgage repayments, or find ways to cut back on household costs, get in touch with your local MoneyQuest mortgage broker. We can work with you to help find a solution to your finance needs.
[1] Quarterly Inflation October – December 2024 Australian Bureau of Statistics. 2025.
[2] Janda, Michael. Falling core inflation raises odds of RBA trimming interest rates in February. ABC. 8/1/25.
[3] Kehoe, Michael. Trump win means higher interest rates and weaker Australian economy. AFR. 6/11/24.
[4] Swain, Sarah. What will happen to grocery prices in 2025 amid the cost-of-living crisis? 9news. 31/12/24.
[5] No reward for being loyal: Australians urged to shop around for a better value electricity plan. ACCC. 30/12/24
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