Westpac and NAB are now predicting bigger and faster cash rate increases over the next few months.
All big four banks now unanimously forecast two more 0.5-percentage-point hikes in August and September, which would total four double hikes in four months.
Here are the big four banks’ updated RBA cash rate forecasts as compiled by RateCity.com.au:
- CBA: 2.6% by November. On a $500K loan, repayments would rise by a total of $687
- Westpac: 3.35% by February. On a $500K loan, repayments would rise by a total of $908
- NAB: 2.85% by November. On a $500K loan, repayments would rise by a total of $760
- ANZ: 3.35% by November. On a $500K loan, repayments would rise by a total of $909
“All big four banks are now expecting two double hikes at the next two RBA meetings, with Westpac and ANZ both predicting the cash rate will reach 3.35% in coming months,” said Sally Tindall, RateCity.com.au research director. “If this happens, the average existing variable rate customer could be paying 6.11% on their mortgage by early next year.”
Tindall said the central bank now has more ammunition to continue its mission to lift the cash rate given this month’s surprising unemployment data and that next week’s inflation figures will also be critical in determining how hard and fast the rate hikes go.
“Inflation is currently at its highest level in over 20 years and could hit a three-decade high when the CPI figures are released next week,” she said. “While these forecasts may seem high to many Australians, it’s important for borrowers to realise the neutral cash rate is likely to be at least 2.5%. Borrowers need to prepare for this new norm, rather than see it as an anomaly.”
Tindall said it was interesting that Westpac now predicts the OCR to climb significantly higher than 2.5% but expects RBA to cut rates in 2024.
According to analysis from RateCity.com.au, a cash rate of 3.35% by February, as predicted by Westpac, will see someone with a $500,000 mortgage at the start of May fork out $908 more in total for their monthly repayments. And if the cash rate hits 2.85% by November, as forecast by NAB, someone with a $500,000 mortgage before the hikes began could see their monthly repayments rise by $760 in total.