Should you expect any more cash rate cuts?

Borrowers are likely to be asking themselves whether now is a good time to apply for a home loan, or if it’s worth holding out in the hope of a further cut to the cash rate. The answer is that nobody knows for sure, but if you’re in the position to make your move onto the property ladder, there could be some decent deals around at the moment.

After all, it’s the first time the official cash rate has dropped this low. The Reserve Bank of Australia (RBA) implemented the cut on February 4, bringing the rate down to 2.25 per cent.

However, in its latest Monthly Business Survey, NAB believes there’s every chance that a further reduction could take place this year. Its initial prediction was that this would be implemented in August, but now this has been brought forward to May in light of the February announcement.

NAB forecasts that the board “will sit back and watch for a few months to see if more needs to be done” before introducing any more changes. Borrowers should bear in mind that this is only a prediction – there is any number of situations that could arise in the coming months that would alter this view.

One of the greatest areas of concern in the economy at the moment is unemployment. December data from the Australian Bureau of Statistics shows that the jobless rate stood at 6.1 per cent, which is still higher than many policymakers would like.

Reducing the cash rate could go some way towards rectifying the situation, but this won’t become evident for several months. In the meantime, borrowers can make the most of reduced rates, but again, how many people decide to make their move won’t become clear for a while yet.