A Light at the End of the Mortgage Tunnel?
After months of battling high interest rates and a sluggish economy, Australian homeowners may finally have something to smile about.
Inflation has eased to 2.3%, staying within the Reserve Bank of Australia’s (RBA) target zone, raising hopes for potential interest rate cuts as early as 2025.
Could this be the break mortgage holders have been waiting for? Let’s break it down.
The Numbers That Matter
While November’s 2.3% inflation rate is slightly higher than the 2.1% recorded in September and October, the trimmed mean inflation—a key figure for the RBA—dropped to 3.2%.
This improvement, down from 3.5% in October, has already exceeded market expectations.
Paul Ryan, senior economist at REA Group, is optimistic:
“This increases the chance of a rate cut earlier in the year. All eyes are now on January’s quarterly inflation data, which could be the deciding factor for the RBA’s February meeting.”
What to Watch in January
The quarterly inflation report, due on 29 January, is expected to paint a clearer picture of the economy.
If inflation stays within the target range—like it did in September for the first time in 3.5 years—homeowners might see rate cuts arrive sooner than expected.
What About Property Prices?
While inflation is easing, home prices have also seen a nationwide drop for the first time in two years—another sign of shifting tides in the property market.
According to PropTrack’s December Home Price Index:
- Prices fell in all capital cities except Perth.
- The median home price now sits at $795,000.
“Price growth momentum has been slowing since March 2024,” says economist Anne Flaherty. “Economic uncertainty has outweighed the benefits of recent tax cuts.”
Interest Rate Rollercoaster: When Will the Cuts Come?
Despite mounting pressure, the RBA held its cash rate at 4.35% through all eight meetings in 2024.
Now, with inflation cooling, banks are weighing in on the timing of cuts:
- NAB predicts three cuts in 2025, starting in June.
- CBA is more bullish, eyeing the first cut in February.
- ANZ and Westpac are playing it safe, forecasting cuts by May.
The Bigger Picture: Economic Challenges Remain
RBA Governor Michele Bullock has voiced concerns about weak private sector growth and rising government spending as the federal election approaches.
Meanwhile, Australia ended 2024 with:
- A $22 billion budget deficit.
- Government debt hitting $1 trillion.
But despite these setbacks, economists agree that the inflation drop signals a more positive outlook for 2025.
What’s Next? Mark Your Calendar
The RBA’s next cash rate decision is set for 18 February.
Until then, homeowners and investors will be glued to the January inflation report to see if 2025 will finally deliver the interest rate relief so many are hoping for.
Ready for a comeback? 2025 might just be the year Australian homeowners catch a break.
