No interest rate relief expected this year, major bank warns – realestate.com.au

ANZ has become the first big four bank to scrap forecasts for an interest rate cut this year as inflation takes longer to rein in than expected.

Having previously predicted the first rate cut would come in November this year, economists at the bank now expect the Reserve Bank will remain on hold until February 2025.

ANZ head of Australian economics Adam Boyton said several factors prompted the rate call change, adding it was “hard to see” the RBA having the confidence to move by the November meeting.

“Since November 2022, we have expected that the first cash rate cut in Australia this cycle would be in November 2024. More recently, however, we have been cautioning that the risks around that view were skewed to a later start to the easing cycle,” Mr Boyton said.

It comes as recent inflation data overshot forecasts, with the Consumer Price Index (CPI) not expected to return to the RBA’s 2-3% inflation target until at least the end of next year.

“The stronger than expected Q1 CPI also makes it hard to see the RBA being sufficiently confident that inflation will return to and stay in the band by the time the November meeting comes around,” he said.

“Accordingly, we now expect the first cash rate cut in February 2025.”

However, he said a rate hike ‘remains unlikely’.

The RBA is widely expected to remain on hold at its June meeting next week, with attention turning to a post-meeting press conference by RBA governor Michele Bullock for clues on the outlook for interest rates.

The minutes of its last meeting showed the board considered both a hike and a hold in May, with the prospect of a rate cut not discussed.

It’s a blow for households holding out for mortgage relief, with financial regulators noting the share of borrowers falling behind on mortgage payments has continued to rise, as have financial hardship applications – albeit from a low level.

In a statement on Tuesday, the Council of Financial Regulators – which is chaired by the RBA and includes the Australian Prudential Regulation Authority (APRA), the Australian Securities and Investments Commission (ASIC) and the federal Treasury – said it was closely monitoring risks to the Australian financial system from lending to households and businesses.

For now, it said those risks remain contained.

“While budget pressures from inflation and interest rates continue to be widely felt, with many households making adjustments to their finances, most borrowers have continued to meet their debt repayments,” the council said following its quarterly meeting last week.

ANZ has become the first big four bank to push out rate cut calls until 2025. Picture: NCA Newswire

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The RBA has raised the cash rate 13 times since May 2022, pushing up loan repayments by around $1,300 per month for a $500,000 mortgage, and more than $2,500 per month for a $1m home loan.

ANZ expects three rate cuts in total next year, which could potentially free up around $250 per month for homeowners with a $500,000 mortgage, and almost $500 per month for a $1m loan.

Economists at the other big four banks – Westpac, CBA and NAB – all continue to expect a rate cut in November this year.