Commonwealth Bank, Australia’s largest bank, is now expecting the Reserve Bank to increase rates faster than expected, with the OCR predicted to hit 2.6% by November.
In its revised forecast, CBA said it now expects the central bank to lift the cash rate by 0.5 percentage points cent in August, followed by another 0.5 increase in September, and a 0.25 rise in November – taking the cash rate to 2.6%.
Here are the big four bank’s cash rate forecasts, according to RateCity.com.au:
- CBA: cash rate to rise by 0.50% in August and reach 2.60% by November this year
- Westpac: cash rate to rise by 0.50% in August and get to 2.60% by February 2023
- NAB: cash rate to rise by 0.50% in August and hit 2.60% by February 2023
- ANZ: cash rate to rise by 0.50% in August and reach 3.10% by February 2024
Analysis from RateCity.com.au showed that if the cash rate hits 2.6% by November, as CBA now forecasts, someone with a $500,000 mortgage in May, before the hikes began, could see a total $687 rise in their monthly repayments. And for someone with a $1 million mortgage, repayments could increase by a total of $1,373.
Sally Tindall, RateCity.com.au research director, said borrowers need to “strap in for one of the fastest rises to the cash rate in our history.”
“CBA now believes the cash rate could hit 2.6% by November – that would be a rise of 2.5 percentage points in the space of seven months,” Tindall said. “The last time the RBA hiked the cash rate this quickly was back in 1994, when the central bank increased rates by 2.75% in the space of just five months.
Tindall said it is unlikely that RBA will be taking its foot off the accelerator in its campaign against inflation, at a time when its counterparts are going full throttle.
“This is turning into a pressure cooker situation for many borrowers,” she said. “As interest rates rise, so will the numbers of households in mortgage stress. Some variable rate borrowers may find their interest rate could double by the end of the year from what they were on before the RBA hikes began in May.”
Tindall urged borrowers who think they can’t afford their monthly mortgage repayments by Christmas to take action now.
“Refinancing to a lower mortgage rate can be one of the most effective ways to inject real relief into your budget,” she said. “Just be mindful of the fact that as rates rise, it will become harder to refinance, particularly if money is already tight, as you might not pass the banks’ stress tests on a significantly higher rate.”
