The ASX’s RBA Target Rate Tracker, is predicting up to four interest rate cuts starting in February next year – a potential game-changer that could put the property boom back on track and offer relief to Australian families.
The anticipated rate cuts are based on forecasted declines in US interest rates, which would strengthen the Australian dollar against the Greenback. This currency shift would put the Reserve Bank of Australia (RBA) in a better position to lower the cash rate. ANZ economist Madeline Dunk believes that the RBA Target Rate Tracker prediction is realistic, given the current economic climate.
“We anticipate three 25 basis point cuts in total, with two occurring in the first half of the year and one in the final quarter of 2025,” Dunk said. This series of cuts could potentially reduce the cash rate to 3.6% by the end of next year.
Dunk believes these rate cuts will bolster household confidence and stimulate demand for housing.
“Affordability remains a significant concern for households seeking to enter the property market,” she explained.
“As our ANZ-CoreLogic Affordability Report highlights, the time required to save for a deposit is currently at an all-time high.” Rate cuts will bolster borrowing capacities, so for those who have deposits saved, their ability to borrow a higher amount will be enabled.
“I don’t think that specific cities will suffer due to an interest rate cut. I think all ships benefit from a rising tide. I note that there are markets within markets, though,” says Bakos. “We will likely see builders and developers targeting sites and renovation projects again. Heightening material costs have been a challenge for this category of buyer, but the toughest challenge has been holding costs with higher interest rates.”
The prediction of rate cuts has also sparked renewed interest in the housing market. Bakos says she has already seen an increase in inquiries from potential buyers. “People are starting to feel more confident about buying a property now that there is a possibility of lower interest rates,” she said.
Despite the uncertainty, the prediction of rate cuts has provided a much-needed boost to the spirits of many Australian families. If the RBA does cut rates next year, it could offer a significant financial lifeline for struggling homeowners.
