Interest rates have become a hot topic as global and local economic events create uncertainty for Australian homeowners. Understanding how factors like Donald Trump’s recent U.S. presidential election win and the Reserve Bank of Australia’s (RBA) decisions may influence mortgage rates is crucial for anyone with a home loan.

The Potential Impact of Trump’s Economic Plans

Donald Trump’s proposed economic policies involve large tax cuts and substantial infrastructure spending, which are likely to increase inflation in the United States. If U.S. inflation rises, it could drive up interest rates in America and, in turn, push global interest rates higher, including those in Australia.

RBA Assistant Governor Christopher Kent has stated that any changes in U.S. economic conditions could have a ripple effect worldwide, which could, in turn, affect Australia’s borrowing costs.

The RBA’s Current Approach to Interest Rates

The RBA has kept the cash rate steady at 4.35%, despite earlier expectations of rate cuts to provide relief for borrowers. RBA Governor Michele Bullock explained that while the central bank is monitoring the global economic situation, it’s still too early to predict the impact of U.S. policy changes on Australia.

Although the RBA previously hinted at potential rate cuts in early 2025, uncertainties surrounding global economic conditions could delay these plans, leaving Australian homeowners waiting longer for financial relief.

Why the RBA Might Delay Interest Rates Cut From February

A recent Finder survey showed that 13 out of 32 experts expected the RBA to cut rates in February 2025. Although this prediction is less certain than it was before the September meeting, February is still the top pick for the first rate cut, according to major banks like ANZ, CBA, NAB, and Westpac.

However, there are signs that confidence in a February cut is weakening. The RBA’s “not ruling anything in or out” language in their latest statement surprised economists like ANZ’s Adam Boyton, who had expected more neutral wording given forecasts of slowing inflation, wage growth, and economic performance. Gareth Aird from Commonwealth Bank noted that if unemployment doesn’t worsen, the RBA might hold off on rate cuts.

NAB’s Taylor Nugent pointed out that the RBA is focused on getting inflation into its 2-3% target range, which may delay rate cuts further. The RBA doesn’t expect this to happen until 2026, leading some analysts, like those from UBS, to suggest that May might be the earliest date for a cut.

How the U.S. Election Influences RBA Decisions

The U.S. election doesn’t directly impact the RBA’s decisions, but Trump’s administration could indirectly affect Australia. For example, if Trump imposes significant tariffs on China, it could create economic complications for Australia. RBA Assistant Governor Christopher Kent has acknowledged this risk, noting that large tariffs on China could negatively impact Australia’s economy.

If Trump’s policies strengthen the U.S. dollar, it might make Australian exports more appealing but also increase the cost of imports, potentially driving inflation higher here. RBA Governor Michele Bullock is aware of these potential inflationary pressures, which could influence the timing of future rate cuts.

The Silver Lining: Rate Cuts Could Be Fast When They Come

Despite worries about delays, some experts believe that when the RBA finally starts cutting rates, they’ll do so rapidly. Economist Scott Phillips said that the RBA may cut rates twice in quick succession to have a meaningful impact. “They tend not to go once and wait,” he said, suggesting that the cuts could come close together once the RBA is confident in its decision.

Big banks are predicting a series of cuts over the next few years. 

CBA and Westpac expect four 0.25% cuts by the end of 2025, lowering the cash rate to 3.35%. NAB anticipates five cuts by early 2026, while ANZ predicts three cuts, finishing at 3.60%.

What Should Homeowners Do Next?

With so much uncertainty around interest rates, it’s important to have a strategy. Reviewing your home loan options and considering refinancing could save you money in the long run. Speaking with a mortgage broker can help you understand your options and prepare for potential changes.

Contact Loan Nerds today for tailored advice. Our experts can guide you through this uncertain time, explore your options, and make sure you’re ready for whatever comes next. Don’t wait—reach out to Loan Nerds now to secure your financial future.