Major bank makes big call on interest rates – here’s when home borrowers can expect some relief

A major bank has now revised its interest rate forecasts to have the Reserve Bank providing relief in February.

NAB, Australia’s biggest business lender, on Monday adjusted its forecasts to have the RBA cutting rates in February instead of May.

This would see the cash rate fall from an existing 12-year high of 4.35 per cent to 4.1 per cent after the summer break.

This would shave $105 off monthly repayments on an average, $641,000 mortgage. 

National Australia Bank also had rates being eased by 25 basis points during every quarter of 2025 until the cash rate fell to 3.1 per cent in early 2026 for the first time since February 2023.

NAB economists Alan Oster and Gareth Spence said it was still too soon to predict a rate cut in 2024 because inflation was still taking a while to moderate.

‘Domestic inflation pressures are cooling, but only gradually, and we continue to expect the conditions for a cut will not be in place this year,’ they said.

‘The risk has been skewed to a first cut earlier in 2025, and today’s change acknowledges the balance of risks has likely shifted sufficiently for the RBA to feel comfortable cutting a little sooner than we earlier expected.’

NAB has adjusted its forecasts 11 days after the Commonwealth amended its predictions to have the RBA cutting rates in December instead of November. 

Reserve Bank Governor Michele Bullock earlier this month stressed interest rates would be unlikely to be cut in 2024 because inflation was still too high. 

But following last week’s meeting, she admitted a rate increase wasn’t considered this time.

‘We didn’t explicitly consider an interest rate rise at this meeting,’ Ms Bullock told reporters.

Treasurer Jim Chalmers hailed this changed in language, despite earlier accusing her of ‘smashing the economy’ with rate rises. 

‘I think it’s a really good development that the Reserve Bank governor is a more prominent voice in the national economic debate,’ he told reporters on Monday. 

‘I try to let the Reserve Bank governor speak for herself and speak on behalf of her board and I respect and cherish her independence and I try not to second guess the decisions the Reserve Bank take independently.’

A 25 basis point rate cut would see monthly repayments on an average, $640,998 mortgage fall by $105 to $3,943, down from $4,048. 

The RBA’s 13 hikes in 2022 and 2023 were the most aggressive since the late 1980s.

Headline inflation in August fell to 2.7 per cent, putting it inside the Reserve Bank’s 2 to 3 per cent target for the first time since August 2021 when Sydney and Melbourne were in lockdown.

But the underlying measure of inflation, stripping out volatile price items, came in at 3.4 per cent because it excluded the one-off effect of $300 energy rebates from the federal government.