Melbourne home loan mortgage holders will celebrate today after the RBA cut the official cash rate to 4.10% following its first monetary policy board meeting of 2025.
Modest as it is, a few champagne corks might have popped across Melbourne when the news of the 0.25% reduction came out.
Underlying inflation, closely watched by the RBA, dropped to its lowest in three years, prompting calls for a rate cut today.
Australia’s Central Bank agreed, conceding that inflation was ‘moderating’ quicker than expected.
‘Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance,’ noted the RBA today.
‘In the December quarter underlying inflation was 3.2%, which suggests inflationary pressures are easing a little more quickly than expected.
‘There has also been continued subdued growth in private demand and wage pressures have eased.
‘These factors give the Board more confidence that inflation is moving sustainably towards the midpoint of the 2–3% target range.’
So, what does this mean?
It’s good news. Depending on the amount and type of home loan, repayments for Melburnians are now set to be around $90 to $150 per month less.
The federal government will be happy, too, given Treasurer Jim Chalmers’ statements on elevated interest rates having the effect of ‘smashing the economy’.
And, with a federal election looming, this will be a huge positive for the government.
Today’s news will also be a relief given that a recent survey found that 47% of Aussie homeowners were struggling to pay their home loans. Some have seen their monthly repayments rise by up to $2000 – others even more – since mid-2022.
Many industry watchers expect the official cash rate to be around 3.35% in the coming year, with between two and five cuts in 2025.
However, the RBA added its usual warning.
‘While today’s policy decision recognises the welcome progress on inflation, the Board remains cautious on prospects for further policy easing.
‘If monetary policy is eased too much too soon, disinflation could stall, and inflation would settle above the midpoint of the target range.
‘In removing a little of the policy restrictiveness in its decision today, the Board acknowledges that progress has been made but is cautious about the outlook’
Last month Macquarie Bank – Australia’s fifth largest lender – dropped its fixed rates and several other banks and lenders have followed suit.
With a further lowering of rates following today’s news, now could be a prudent time to assess your options for the best deal.
If you would like to review your mortgage rate, contact Mortgage Broker Melbourne. We are one of the most positively reviewed mortgage brokers in Melbourne.
You can find out more in our recently published article on preparing for a rate cut.
Additionally, we can offer you tips on how to uncover lower rates, boost your savings, consolidate other debts, and take the pressure off increases in household costs.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!