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When are interest rates expected to drop?

From May 2022, the Reserve Bank of Australia (RBA) began one of the most aggressive monetary tightening periods in Australian history as it tried to curb soaring inflation.

But with several months of cash rate pauses by the RBA, many believe the tide may have turned.

So, now the question on everyone’s lips is: when will interest rates come down in Australia?

While there’s no crystal ball to predict exactly what the RBA will do next year, there is growing speculation that interest rates will come down in 2024. Let’s see what the experts are predicting.

What the Big Four banks are saying

  • Commonwealth Bank expects there to be four cash rate reductions, kicking off from March 2024 and finishing with a cash rate of 3.10% by the end of next year.
  • Westpac is banking on a more gradual decline, starting with a cash rate drop in September 2024 and another one in December to 3.60%.
  • NAB is anticipating a cash rate cut in August 2024. It anticipates the cash rate will return to around 3% by early 2025.
  • ANZ foresees the RBA pausing the cash rate for an extended period, before easing it towards the end of 2024.

It’s important to remember that the predictions above are not a guarantee. Unforeseen events like changes in global economic conditions or domestic policies can impact cash rate decisions.

What about inflation?

The RBA has been trying to get inflation back within the target range of 2-3%. In recent months, we’ve seen inflation coming down, so it appears things are on track.

According to the RBA, headline inflation is expected to decline to 4.5% by the end of 2023 and to reach 3% by mid-2025.

What you can do as a borrower

Stay informed

Make sure you keep across the news so that you are up to date with the RBA’s cash rate decisions.

Next year the RBA is changing things up, following recommendations from the review of the central bank. There will be eight cash rate decisions instead of 11. Four of the meetings will be on the first Tuesday of February, May, August and November. The other four meetings will be held midway between these meetings (dates to be confirmed).

Regularly review your home loan

With interest rates potentially on the move, it’s important to review your home loan. It’s especially true if you haven’t had it checked in the last two years.

Ask us for a home loan health check and we’ll explain how your current loan measures up in today’s mortgage environment, along with if refinancing could be right for you.

Like to talk through your options?

Maybe you’re thinking about buying a property once interest rates come down. Talk to us about how a drop in interest rates could affect your borrowing capacity and what you can do now to prepare for a property purchase in the near future.

The Financial Landscape Has Changed Forever

It is important to understand how much you’re able to borrow prior to committing to any financial transaction. With the recent evolution of the lending landscape don’t make the mistake of assuming you will automatically obtain finance.

Seek professional advice regarding loan structure and strategy at the outset.

Changes by the Banks in relation to loan term, repayment type, satisfactory security and affordability has redefined the loan approval process.

Whether you are seeking to enter the Residential or Commercial Property Market it is critical that you seek professional advice today.

Strategic Investor Group will crunch the numbers and provide you with the best options, based on your overall financial position, and individual personal circumstances.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

What will be the economic effect of the Banking Royal Commission?

We are already seeing the impact with individuals and company’s ability to access Bank loans becoming extremely difficult.

With the loan approval process requiring applicants to evidence the ability to service their borrowings at twice the actual interest rate, have the recent regulatory changes created a barrier for genuine borrowers.

Prudent lending principles are required, however, have the regulators gone too far, and will these actions have a flow-on effect for future economic growth?

Understand your individual position by speaking to a professional today.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Australia’s credit reporting system is changing. Are you prepared?

A key component lenders use when determining whether you are approved for a loan and how much you can borrow is your credit report, which sets out your previous credit applications and any defaults on your payments

Australia is currently moving to a new system of credit reporting that will help reward people who pay off their debts on time.

Following industry-wide changes, your credit report will soon show a much more comprehensive picture of your credit health and your ability to pay your debts.

Consumers who have been diligent in making their repayments on time may be able to borrow more money and at a lower interest rate than before.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Will you be affected by The Hayne Royal Commission?

Lenders have been tightening their lending controls and interest-only rates in response to regulatory pressure to lower record levels of household debt and boost prudential standards.

Ratings’ agency Standard and Poor’s is warning owner-occupiers are more likely than investors to struggle with the transition to principal and interest repayments, particularly for loans underwritten before 2015 when lending standards for interest-only were less strict.

If you have an Interest Only loan due for review it’s time to seek professional advice regarding your options.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Interest Rates – What will 2018 & 2019 bring?

Most economists are forecasting that the Reserve Bank of Australia (RBA) will probably only make one rate rise (+25bp) to the cash rate by late 2018 while a smaller group of analysts expect interest rates to remain on hold well into 2019. Westpac’s chief economist Bill Evans has even gone as far as saying that he expects rates to remain at current levels well into 2020.

Stability from the RBA doesn’t always translate into stability for borrowers as many have already faced rising mortgage costs during the last 12 months, especially those with investment and interest-only loans.

Now’s the time to take stock and review your individual financial position.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Property Investment – Timing is everything

The market waits for no one. It will go up or down with or without you as an investor.

An experienced independent advisor will ensure you won’t buy the wrong asset, wait too long or pay too much.

Whilst it may seem like you’re paying more upfront, having professional advice in the early stages, will ensure that you come out financially on top in the long run.

Remember, the price is what you pay but the value is what you get.

Property is a forgiving asset and you can mitigate the perceived risk largely by ensuring you buy the right property and take a long-term view.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

2018: The year to set up your financial future

Based on the expectations of most economists, mortgage holders have between nine and 18 months of the current record low-interest rates before the Reserve Bank will begin the process of moving them up towards more long-term historical norms.

Despite some projections from economists that the RBA will move rates up mid to late 2018, the central bank will be keeping a very close eye on the housing market and will be loathed to become accountable for any precipitous fall in house prices.

Low wages growth and inflation and very weak consumer spending will provide it with the conditions to retain interest rates at 1.5 per cent.

Interest rates are more likely to go nowhere this year.

Now is the perfect time to secure your financial future by securing the best possible borrowing solution.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Commercial property behaved mostly as expected in 2017

Yields continued to firm, tenants were back in the market and the office sector did particularly well, benefiting from business growth and, in the case of Sydney, withdrawal of stock.

Australia quietly moves towards its 27th year of positive economic growth. With high levels of transparency, a comparatively stable government, strict planning controls and strong performance of most commercial property types, why wouldn’t you want to buy?

If you are considering entering the commercial property market, or have already taken advantage of the sound conditions present, contact Strategic Investor Group to ensure you get the right advice regarding any potential loan structure.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group

Most Australians indicate their biggest life goal is a financial one

Most Australians indicate their biggest life goal is a financial one, but many admit failing to plan is a roadblock.

Popular dreams and aspirations

Interestingly, nearly half of all Australians recently surveyed said they dreamed about the future every few weeks, with people’s major life goals including things such as:

  1. Full financial freedom and independence – 59%
  2. Having the lifestyle of their choice – 58%
  3. Being able to pursue interests and hobbies – 50%
  4. Having more free time to spend with loved ones – 43%
  5. Having a family – 19%.

Let Strategic Investor Group remove the roadblock and help you reach your dreams and aspirations.

Carl Thompson – Commercial Lending Specialist, Strategic Investor Group