Australia’s major banks have begun lowering fixed mortgage rates, signalling growing confidence that the Reserve Bank of Australia (RBA) may soon move to cut official interest rates.

Macquarie Bank was the first to act in mid-January, with NAB following suit this week. NAB Economist Alan Oster forecasts that the RBA will implement a 25-basis-point rate cut in mid-February.

This expectation is driven by a decline in underlying inflation, which dropped from 3.5% to 3.2% in the December quarter. While inflation remains above the RBA’s target range of 2% to 3%, the slowing growth trajectory suggests rate adjustments may be on the horizon.

The Commonwealth Bank, ANZ, and Westpac have also adjusted their forecasts, now predicting a February rate cut. The official cash rate has held steady at 4.35% since November 2023.

According to Canstar, a 25-basis-point reduction would lower mortgage repayments by $92 per week on a $600,000 loan, providing financial relief to borrowers. Canstar Data Insights Director Sally Tindall anticipates more banks will follow in cutting fixed rates.

“The cost of wholesale fixed rate funding has started to ease slightly. This, combined with a prospective cash rate cut, should push other banks into moving on fixed rates,” Tindall explains.

These developments highlight the shifting landscape of Australia’s lending market, with borrowers and investors closely watching the RBA’s next move.