NAB predicts 0.50% rate cut: but will it happen?
Even as far back as last month the major bank said it could foresee a bumper rate cut.
After US President Trump announced tariffs on the rest of the world, the stock market went into a frenzy. You probably remember.
Although we now know things calmed down fairly swiftly, at the time there were several predictions about how the RBA would be forced to act if things had stayed rocky.
While most economists began talking of an extra rate cut this year, NAB went as far to predict not only an extra rate cut but a bumper cut in May.
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Well, 2 weeks out from the next RBA decision the major bank has doubled down (hopefully like this rate cut, am I right?) on its prediction.
What did NAB say?
In its latest Economic Update, the bank has confirms it still thinks a 0.50% rate cut will come in May. Followed by further 0.25% cuts in July, August, November and February.
But when most other economists are more reserved and the tariff frenzy has cooled, why does NAB think this?
According to its update it recognises the market rebound, but it remains concerned about business damage and household sentiment. Household sentiment is how the everyday person actually feels about the economy, which impacts how much they're willing to spend.
"If the RBA knew on 1 April what it knows today, it is likely that the Board would have decided to lower the cash rate by 25bp at the last meeting and followed up that easing up with a 25bp rate cut in May. There is thus some catch up required to align policy settings with recent developments," NAB has said.
How would this bumper cut affect home loans?
So while it's never safe to get your hopes up, let's take a look at what a 50bps reduction might mean for the average borrower.
The Australian Bureau of Statistics (ABS) has the average home loan value in Australia as $665,978. Using the average interest rate from the RBA of 6.2% and a 30 year loan term, current home loan repayments would be $4,079.
Removing 0.50% would take those repayments down to $3,866. A saving of $213 a month!
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