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RBA to hold steady as inflation does the same - what borrowers can do to get a rate cut ahead of time

Eden Radford avatar
Eden Radford
- 3 min read
RBA to hold steady as inflation does the same - what borrowers can do to get a rate cut ahead of time

The latest monthly CPI indicator released today is further evidence the RBA will keep the cash rate on hold at 4.35 per cent for the third consecutive meeting, which takes place in just under three weeks’ time.

The ABS monthly indicator, released today for the month of January, showed CPI held steady at 3.4 per cent annually.

While this rate is the same as the previous month, it is lower than many economists expected, and yet another sign Australia’s inflation woes are pacifying.

Excluding volatile items and holiday travel, Australia’s annual CPI results continued to track down, dropping from 4.2 per cent in the previous month to 4.1 per cent in January, according to the ABS figures.

RBA likely to hold firm for now

While RBA Governor Michele Bullock has warned borrowers another rate hike cannot be ruled out, today’s result pushes the possibility of this scenario further out of the picture.

The timing for any potential cuts, however, is less clear.

The RBA has not presented any firm indication as to the timing of potential rate cuts, however, the big four bank economic teams all believe Australia will see at least one rate cut in the second half of 2024, with CBA predicting as many as three before the year’s end.

Current big four bank cash rate forecasts

Peak of current cycleFirst cutNo. of cuts forecasted in 2024

Source: RateCity.com.au.

Borrowers should break the holding pattern themselves

Australians have not been sitting idle during the 4.25 percentage point increase to the cash rate.

RateCity.com.au analysis of RBA data shows the average owner-occupier on a variable rate has negotiated or refinanced their way out of almost three standard cash rate hikes – or 0.72 percentage points.

Interestingly, current big four bank customers have fared better than the average, with the analysis showing these owner-occupier variable rate customers have, on, average, managed to avoid 0.77 percentage points worth of rate rises.

Average owner occupier variable rate across all institutions: pre-hikes vs today

Apr-22Dec-23Change (% pts)Diff to cash rate rise (% pts)
Av. owner-occupier variable rate2.86%6.39%3.53%-0.72%
Av. owner-occupier variable rate – big four banks2.88%6.36%3.48%-0.77%
Cash rate0.10%4.35%4.25%

Source: RateCity.com.au, RBA outstanding variable rates.

How much could you save by renegotiating?

If the average owner-occupier with a $500,000 mortgage and 25 years remaining, knocked 0.72 percentage points off their rate, they could save around $3,601 in the next year in interest charges.

If they played hard ball with their bank, or switched lenders to one offering a rate of 6 percent, the potential interest saved would increase to around $5,550.

Savings from renegotiating the mortgage

Based on an owner-occupier on a variable rate paying principal and interest with $500,000 debt and 25 years remaining

RatePotential interest saved
Complacent borrower7.11%
Renegotiate to average6.39%$3,601
Play hard ball6.00%$5,550

Source: RateCity.com.au. Assumes borrower is on a variable rate and has not renegotiated their mortgage since the start of the hikes. Excludes potential cash rate changes over the next 12 months.

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Product database updated 17 Apr, 2024

This article was reviewed by Research Director Sally Tindall before it was published as part of RateCity's Fact Check process.

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