Are home loan rates going to drop?

This has to be the top question on all borrowers minds right now, and for good reason – interest rates are as high as they have been in over a decade, and, loan balances are also substantially higher than they have ever been, couple this with very high cost of living impacting everything from the groceries we buy to our electricity bills and borrowers are very obviously hoping for some rate relief – and soon.

However, when will this occur? Economists are split as to when this will occur with most predicting rate drops in the second half of 2024 but there are some hurdles to get over first.

The Reserve Bank of Australia – who set the cash rate which influences consumer interest rates – will want to see a continued reduction in consumer spending figures and therefore inflation figures trending towards their preferred inflation range. So far the data is positive but they will want to see this trend continue.

And the other hurdle on our horizon is the proposed “Stage 3 tax cuts” which effectively puts money back into our pockets – the exact opposite of the intention of the RBA rate rises. I feel the RBA will want to see the impact of these in real figures before making drastic changes but we are very hopeful that we may see a tentative rate cut at least while they watch the impact of these changes.

What is positive is, the market appears to support this view and we are seeing some green shoots in terms of small discounts, a little shuffling of interest rates even now.