How long will high interest rates last in Australia?

In 2022 and 2023, we saw the same scenario of promises that interest rates would either go down or stay the same. And then the mortgage rate went up. Articles with such forecasts are either deleted or updated, but in fact, we are in a time loop of promises; how long will high interest rates last?

The end of 2024 promises us lower rates again. Here are the current forecasts for the Cash Rate:

And here are the forecasts for the 30-Year Fixed Mortgage Rate.

But should we believe these promises and when will high interest rates really go down?

Why Australian mortgage rates could fall in 2025?

Australian mortgage rates could potentially drop in 2025 for a variety of reasons linked to the Reserve Bank of Australia’s (RBA) monetary policy and broader economic factors. Here are the key drivers behind this possibility:

• Easing Inflation – If inflation stabilizes within the RBA’s target of 2-3%, there could be room for interest rate cuts to support growth. Factors like lower energy costs, improved supply chains, or slower wage growth could drive this trend.
• Slowing Economic Growth – If the Australian economy shows signs of slowing, such as reduced exports or weaker consumer confidence, the RBA might lower rates to stimulate spending and investment.
• Struggles in the Housing Market – High mortgage rates in previous years have cooled the housing market. To reignite activity and make borrowing more affordable, the RBA could cut rates.
• Labor Market Weakness – Rising unemployment or slower job creation might prompt the RBA to reduce rates to encourage hiring and economic activity, as a sluggish job market often leads to reduced consumer spending.
• Global Monetary Trends – If global central banks, like the US Federal Reserve, lower rates to address slowing growth or other issues, the RBA might follow to keep Australian currency competitive and aligned with global trends.
• High Household Debt – With Australia’s significant household debt, lower rates could ease financial stress for borrowers, potentially reducing defaults and boosting economic stability.
• Government Coordination – Fiscal policies aimed at stimulating growth could align with RBA rate cuts, creating a dual approach to economic recovery.
• Cooling Property Prices – If property prices continue to fall, lowering rates might stabilize the market by attracting more buyers and investors.
• Weak Consumer Spending – High rates in 2023-2024 may have curbed spending, so rate cuts could revive household consumption, which is a critical driver of the Australian economy.
• Geopolitical or Economic Shocks – Unpredictable events, such as geopolitical tensions or market instability, could lead to rate cuts to cushion the economy against potential damage.
• Australian Dollar Strength – If the dollar becomes too strong, hurting exports, the RBA might lower rates to weaken the currency and boost export competitiveness.
• Pandemic-Era Stimulus Effects – As the momentum from earlier stimulus programs fades, economic activity might slow, prompting the RBA to cut rates to maintain growth.
• Financial Stability Concerns – If high rates start to destabilize heavily indebted sectors, rate cuts could be used to mitigate risks and restore balance.

These factors show that future rate adjustments depend on balancing inflation control with economic growth and financial stability. While 2025 may see opportunities for rate cuts, much will depend on how global and domestic trends evolve.

So, how long will high interest rates last in Australia?

The list above is literally all the direct answers you can find on this question on Web. But to understand which of these scenarios is more realistic and which is less, you need to understand the trends and the current market situation.

National Director of Metropole Properties Brett Warren, discuss should you buy a property now or wait. Despite high interest rates, property values have continued to rise for 18 of the last 19 months, driven by factors such as a surge in net overseas migration, fewer people per household, and restrictions in the construction sector.

Perhaps some investors really think that the US elections will change things. And who knows, maybe it will happen. But we must not forget that the real estate market has its own rules of the game.

So far, these rules of the game do not give clear signals about changes, so any forecasts for the coming year should be taken with skepticism.