Thankfully for homeowners, interest rates have been trending lower this year.
But are there more rate cuts to come? And if so, when is the next one likely?
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When is the next interest rate cut?
There are a couple of ways to see where interest rates are likely to be heading next.
The first is looking at the RBA Rate Indicator, which shows market expectations of a change in the Official Cash Rate (OCR) set by the Reserve Bank of Australia.
The Australian stock exchange highlights that this indicator calculates a percentage probability of an RBA interest rate change. This is based on the market determined prices in the ASX 30 Day Interbank Cash Rate Futures.
According to the most recent futures data, there is currently an 84% probability of the RBA cutting interest rates by 25 basis points to 3.35% at its next meeting on 30 September.
While not fully priced in, clearly the market is betting heavily on the central bank taking action at this meeting.
Looking further ahead, cash rate futures have fully priced in one interest rate cut by December and then almost fully for a second cut by May 2026, bringing rates down to 3.1%.
Economist predictions
Another way to find out when interest rates are likely to be moving is from economists that are paid to forecast this sort of thing.
According to the latest Westpac Banking Corp (ASX: WBC) Weekly report, its chief economist Luci Ellis isn't expecting a cut in September but still believes that one further reduction to 3.35% is coming before the year is out.
After which, she is forecasting another cut to 3.1% by March 2026 and then one final cut to 2.85% by June 2026. The RBA is then expected to keep rates at that level until at least June 2027.
Her colleague, Westpac Senior Economist Justin Smirk, agrees that the RBA is likely to hold off on cutting interest rates in September. Instead, Smirk thinks the central bank will wait for the full September quarter CPI, which is due in late October. He said:
Core inflation has unexpectedly picked up… we are watching closely to see if this is the start of a new, more inflationary trend.
The Senior Economist highlights that the RBA has already cut rates three times this year, but this latest data could delay further cuts, especially if inflation proves sticky.
