Last of big banks pulls surprise rate cut move

The last of Australia’s big four banks has had a sudden change of heart, pulling a rate cut move that will see homeowners save hundreds of dollars.

RBA governor, Michele Bullock, is now under pressure to see rates cut in February at the next board meeting. Picture: NewsWire / Jeremy Piper

The last of Australia’s big four banks now expects to see interest rates cut in February, bringing relief forward by three months for struggling homeowners – with another surprise in the wings.

NAB Group chief economist Alan Oster now expects the Reserve Bank to not just cut in February but deliver a double shot to the cash rate of a slash of 25 basis points – twice the general expectation of a gentler approach 12.5 bps at a time this year.

MORE: Rental sting eases across Australia

Entire town for sale for price of a house

NAB group chief economist Alan Oster says the latest inflation numbers changed everything.

“We now expect the RBA to cut the cash rate by 25 bps in February,” he said. “We still expect the cutting phase to be gradual, with the RBA taking the cash rate down to 3.1 per cent by February 2026.”

According to Canstar calculations, one 0.25pp cut would give someone with a $600,000 debt and 25 years remaining on their loan $92 dollars back to their budget immediately if the banks passed it on in full.

The NAB move comes a day after Westpac brought forward the timing of the first rate cut to February, and means all four are now united in their expectations after inflation data moderated more quickly than RBA expected over the holiday period.

NAB home lending executive Denton Pugh said “many Australians have been doing it tough – so a cut early in the new year will be welcomed. As always, we remain ready to help our customers, get in touch with your bank if you need assistance.”

“While Australia’s labour market remains strong, we do not see current conditions as inflationary”

MORE: Listed: Every housing hand-out you can get

No-go zones: Worst suburbs for investors revealed

NAB executive general manager Denton Pugh says current conditions were not seen as inflationary.

The February move was expected to mark the start of the central bank’s gradual easing of the official cash rate, he said.

Canstar.com.au data insights director, Sally Tindall said inflation was “close enough to warrant action” now and called for homeowners to appraoch their lender now rather than wait for RBA’s February meeting.

“A rate cut in February has the potential to inject almost $100 a month back into the budget of someone with a $600,000 mortgage with what should be at least one more rate cut waiting in the wings.”

“Pick up the phone today and haggle with your bank for a rate cut. Of course, there’s no guarantee the RBA will move next month, services inflation could still be keeping the Board up at night, enough to keep the cash rate in its current holding pattern for another couple of months. So if you’ve got a mortgage don’t bank on rate relief until it hits your bank account.”

MORE: Billionaire wharf precinct developers’ latest move

Super fund Aware strikes CBD office deal

Homeowners should contact their lender and ask for a cut now, Canstar said. Picture: William WEST / AFP.

Mr Oster said “our view since June has been that the RBA would cut 75 or 100bp in 2025, beginning in February or May”.

He said there was “still value in waiting” though.

“The pivot in the RBA’s communication in December, confirmation of weaker than forecast CPI outcome for Q4 and a softer outlook for the housing components of inflation (compared to the November staff forecasts), alongside further encouraging progress on market services, means that we think the RBA will now make the first cut in February.

Any reductions was expected to be gradual this year though, he said.

“While the board is likely to have gained confidence that inflation will sustainably return to target as soon as late 2025, the labour market remains resilient (and there is some risk of retightening) with growth still expected to pick-up this year.”

The RBA left the cash rate target unchanged at its last board meeting on December 10 at 4.35 per cent. The ASX rate tracker jumped to a 95 per cent chance of a rate cut to 4.1 per cent at the next meeting on February 18.

MORE REAL ESTATE NEWS

Originally published as Last of big banks pulls surprise rate cut move