Home loan relief loans as NAB says rate rises are now over

NAB has changed its call on official interest rates ahead of the Reserve Bank of Australia’s board meeting in early February.

National Australia Bank has joined its three big four peers in calling the peak of Reserve Bank interest rate rises.

NAB group chief economist Alan Oster said on Wednesday that the next RBA move would be down, but this was not likely until November.

All four major banks – and most economists – now agree that the RBA is done lifting interest rates, following lower-than expected monthly inflation numbers released last week.

Mr Oster said the RBA was expected to remain on hold until November, before cutting its official cash rate by 1.25 percentage points before the end of 2025.

“We had previously expected the RBA to take rates to 4.6 per cent to take some further insurance that inflation would reach the target band over the next two years,” he said.

Mortgage customers and businesses hope rates have reached their peak. Picture: iStock

“However, with the RBA having been reluctant to move higher and the Q4 CPI print providing some breathing room, the data will not push the board in the same manner as November.”

However, underlying inflation could potentially accelerate in the March quarter as rent subsidies dropped out of the data, Mr Oster warned.

“Cost pressures have eased significantly for goods distribution sectors and we will likely see a period of discounting,” he said.

“However, it remains uncertain how long this will persist and the ultimate degree to which price rises over recent years are unwound.

“Consumer demand which grew strongly through 2022 and early 2023 has now clearly slowed.”

RateCity research director Sally Tindall said the recent inflation figures were “good news”, but warned borrowers to remain cautious.

“When the Reserve Bank board meets in February, they won’t be discussing rate cuts,” she said.

“They will be deciding between another pause or another hike.

“If you have a mortgage, I think it’s wise to plan for one more rise just to be on the safe side.”

Ms Tindall said people should not bank on rate cuts coming too soon.

“Inflation has been quite a difficult beast to slay and has taken more rate hikes than expected to try to defeat,” she said.

RateCity research director Sally Tindall says don’t expect quick cuts. Picture: Tim Hunter.

Official quarterly CPI data due on January 31 would shape the RBA’s next move.

“There’s more data to come in the door before the RBA next meets,” Ms Tindall said.

BetaShares chief economist David Bassanese said he expected RBA rate cuts totalling 0.6 per cent this year, “more than the market currently expects”.

“A lower-than-expected inflation path and increase in unemployment will allow the RBA to cut interest rates in 2024, with my base case being cuts at the August and November policy meetings,” he said.

The August move would be a larger-than-usual 0.35 percentage points, bringing the cash rate back to quarter percentage point levels, Mr Bassanese said.

BOQ chief economist Peter Munckton said inflation would fall further in 2024 but at a slower rate than in 2023.

“Lower oil and gas prices will help and it looks like that there will be no big rise in electricity prices this year,” he said.

“A stronger Australian dollar will reduce the price of imported goods and services.”