The National Australia Bank has cut its May forecast for when the next rate cut will happen, delaying it much further. Photo: NewsWire/Gaye Gerard
One of Australia’s largest banks has issued a sweeping interest rate warning to homeowners and borrowers.
The National Australia Bank on Thursday scrapped its forecast for when the next cash rate cut will occur, warning the Reserve Bank of Australia would now remain steady at 3.6 percent for the foreseeable future.
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Rising home prices and booming investor lending would be part of the reason why more rate cuts would only add fuel to the fire.
The move comes as rising house prices and booming investor lending complicate the RBA’s decision-making processes, making further cuts unlikely as the central bank tries to prevent the economy from overheating.
“We no longer expect the RBA to deliver a final cash rate cut in May 2026,” NAB said. That means Australians hoping for a rate cut will now have to wait a good seven to nine months for the RBA’s monetary policy meetings afterwards to see if the numbers have shifted again.
NAB’s economic forecasts were also slightly revised downwards, with GDP expected to grow by around 2 percent and unemployment to remain stable at 4.4 percent, rather than falling as previously hoped.
NAB Group chief economist Sally Auld wrote the report with colleagues Gareth Spence and Taylor Nugent. Photo: Nikki Kort
NAB chief economist Sally Auld, head of Australian economics Gareth Spence and senior economist Taylor Nugent attributed the shift to three key factors: inflation – underlying inflation is expected to remain above 3 percent in the coming year; growth – the economy is accelerating and capacity is already limited; and housing – rising house prices and investor activity argue for stable policies.
They see the effects of tax cuts and previous interest rate cuts that boosted income growth fading in the coming months, adding that the RBA has time to decide whether even higher rates will be necessary.
“For the RBA, the appropriate position will be to remain largely neutral for the time being,” the NAB team said.
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