How homeowners could score $8,000 discount on mortgage

A new report suggests help is on its way for struggling homeowners who have had their mortgage increase in many cases by $12,000 a year.

Homeowners can look forward to interest rate cuts of $8,000 a year on average by the end of 2026 but the RBA could delay a rate cut in February until more economic data is available.

Deloitte Access Economics Partner Stephen Smith has made the prediction in the December 2024 edition of the report Business Outlook ahead of today’s inflation data.

In good news for homeowners, the report suggests help is on its way for struggling homeowners who have had their mortgage increase in many cases by $12,000 a year.

“Deloitte Access Economics expects the Reserve Bank to cut the cash rate by a total of 75 basis points through the 2025 calendar year, followed by a further 75 basis points in 2026. By the end of the rate cutting cycle, a household with an average sized mortgage and a variable mortgage rate would be around $8,000 better off in today’s dollars,’’ Mr Smith said.

Homeowners can look forward to interest rate cuts of $8,000 a year on average by the end of 2026. Picture: iStock

“The outlook for 2025 could be seen as a kind of economic Rorschach test – the interpretation depends on an individual’s perspective, something that will become increasingly obvious as we move towards the first Reserve Bank meeting of the year in February and onwards towards the federal election.

“Take the Reserve Bank. As the December quarter Consumer Price Index (CPI) data will likely show, underlying inflation is moving sustainably towards the target range of 2-3%. That trend, plus the fact that Australia has been in a per capita recession for over a year, with an economy growing at its slowest rate since the 1990s, outside of the pandemic, should open the door for an interest rate cut.”

Have your say in The Great Aussie Debate. Take the survey here:

“Yet, the surprisingly resilient labour market, elevated government spending, and a falling Australian dollar is complicating the Reserve Bank’s decision. While the conditions for a rate cut are now real, a cautious Reserve Bank may well hold off until more information on the domestic economy and the rapidly changing global context is available, before cutting the cash rate.”

But he warned that a lack of comprehensive economic reform, geopolitical risks, an uninspired policy discourse, and the unaffordability of decent housing suggests there is an opportunity to do better.

“Most notably, Australia’s middling productivity performance is cause for alarm. In real terms, economic output per hour worked has barely shifted over the past decade and has declined since 2020.

Deloitte Access Economics expects the Reserve Bank to cut the cash rate by a total of 75 basis points through the 2025 calendar year, followed by a further 75 basis points in 2026. Picture: iStock

“At the same time, dwelling construction remains in the doldrums, but appears to no longer be getting worse. Fewer than one million new dwellings are now expected to be completed over the next five years, below the National Housing Accord target of 1.2 million homes, meaning Australia’s housing crisis is likely to last at least another decade.”

Treasurer Jim Chalmers said the Deloitte report makes it clear the soft landing the Albanese Government have been working towards is looking more and more likely.

“Inflation is down, wages are up, unemployment is low, we’ve overseen the creation of more than 1.1 million jobs and as a result Deloitte expects growth in Australia to pick up this year,’’ he said.

Jim Chalmers said the report makes clear the soft landing the Albanese Government have been working towards is looking more and more likely. Picture: NewsWire / John Gass

“The biggest risk to the progress we’ve made would be a Coalition government that would come after Medicare again, push wages down, and push electricity prices up with the most expensive form of new nuclear energy.”

Deloitte Access Economics is expecting economic growth in Australia of 1.6% in 2025, before picking up to 2.3% and 2.7% in 2026 and 2027, respectively.

Finance Minister Katy Gallagher has left the door open for further measures to offset inflation in the government’s next budget, scheduled for the end of March.

“We are mindful of the economic conditions, how people are feeling out and about and whether there are any further responsible decisions we can take then can assist households as we navigate this time,” Senator Gallagher told ABC RN.

Originally published as How homeowners could score $8,000 discount on mortgage