NAB Group CEO Andrew Irvine has made an optimistic prediction for Australian mortgage holders in 2025, forecasting multiple interest rate cuts from the Reserve Bank of Australia (RBA) after a challenging year of high rates.
With the RBA holding the cash rate at a decade-high 4.35% for more than a year, pressure has been mounting on mortgage holders. However, Irvine believes that 2025 will mark a turning point, offering some relief for homeowners struggling with high repayments.
Irvine is confident that the RBA will reduce the cash rate three times this year, starting with the first cut expected in May. He anticipates that the RBA will then gradually lower the rate to 3.6% by the end of 2025, providing much-needed relief to households and businesses alike. This would signal a shift towards a more stable and manageable economic environment, after months of financial strain.
Impact on home loan repayments
If NAB’s forecast proves accurate, homeowners with a $600,000 loan could see a reduction in their monthly repayments. According to Canstar, a 0.25% rate cut per quarter would lower repayments by approximately $269 per month by the end of 2025. This change could have a significant impact on household budgets, offering some breathing room for Australians who have been “budgeting hard” in the face of rising costs.
Gradual economic improvement expected
Irvine pointed out that while the rate cuts will provide relief, household finances will remain under pressure until the economy improves later in the year. He described the current economic situation as the “hardest point of the economic cycle,” but reassured Australians that conditions would gradually improve as tax cuts take effect and deposit balances rise.
He also mentioned that consumer confidence and business sentiment would benefit from the first rate cut, which he believes will have a psychological impact beyond its immediate financial effects. The sense of relief and optimism that comes with a reduction in interest rates could spur more spending and investment, leading to positive growth in the latter half of 2025.
Different predictions across the big four banks
NAB’s prediction aligns with expectations from Westpac and ANZ, both of which also foresee the first rate cut in May 2025. However, Commonwealth Bank is more optimistic, anticipating that the RBA could cut rates as early as February. Regardless of the timing, most of Australia’s major banks expect the RBA to ease rates gradually, with the cash rate eventually falling below 4% by mid-2026.
A glimmer of hope for mortgage holders
As interest rates have weighed heavily on mortgage holders for over a year, Irvine’s forecast provides a glimmer of hope for 2025. While the improvement may be slow and measured, the prospect of lower rates will likely ease the financial burden for millions of Australians. For those waiting for some relief, the beginning of 2025 could mark the start of a positive shift.
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