Many Aussie families are facing a tough Christmas as more RBA hikes are expected following the annual headline inflation hitting 7.3% in September.
With inflation now at the highest annual rate since 1990, according to ABS, the central bank said it was prepared to keep lifting rates to bring inflation back down to the target range of between 2% and 3%.
The higher-than-expected inflation figures have prompted three of the big four bank economic teams to raise their cash rate forecasts, with CBA and ANZ raising their peaks by 0.25 percentage points, while NAB has increased its peak by 0.5 percentage points, RateCity.com.au reported.
Here are the big four bank cash rate forecasts:
- CBA: +0.25% in Nov, +0.25% in December, peaking at 3.10%. Two 0.25% cuts in August and November 2023
- Westpac: +0.25% in November, +0.25% in December, peaking at 3.60% in March 2023. Four 0.25% cuts in 2024
- NAB: +0.25% in November, +0.25% in December, peaking at 3.60% in March 2023
- ANZ: +0.25% in November, +0.25% in December, peaking at 3.85% in May 2023. Two 0.25% cuts in 2024
It is fairly certain that there will be a seventh consecutive rate hike when the board meets next Tuesday, with a 0.25-percentage-point increase most likely. This would take the cash rate to 2.85% – the highest rate since the April 2013 meeting. Another 0.25-percentage-point hike could see the average borrower with a $500,000 loan before the hikes started in May paying a total of $760 more a month, RateCity.com.au analysis showed.
RateCity.com.au crunched the numbers to see how the forecasts would affect the average borrower’s monthly repayments if realised. See table below.
|
Total increase to repayments 1 May 2022 to peak
|
|||
|---|---|---|---|
|
Loan size
|
CBA
|
NAB
Cash rate 3.60%
|
ANZ
|
|
$500,000
|
$834
|
$983
|
$1,058
|
|
$750,000
|
$1,251
|
$1,474
|
$1,587
|
|
$1 million
|
$1,668
|
$1,966
|
$2,117
|
Note: Calculations are estimates and repayments are for an owner-occupier paying principal and interest over 25 years. Starting rate is the RBA existing variable customer rate of 2.86% in April 2022 and big four bank cash rate forecasts are applied.
“It’s going to be a tough Christmas for many families with two more rate hikes knocking on the door at the same time inflation is set to peak,” said Sally Tindall, RateCity.com.au research director. “Inflation isn’t going away without a fight. The RBA is likely to have to throw more firepower at it than it may have first anticipated. It’s not surprising to see CBA, NAB, and ANZ increase their cash rate forecasts on the back of today’s higher than expected inflation figures.
“ANZ economists believe the cash rate could climb by another 1.25 percentage points by May next year – this would see official rates rise by 3.75 percentage points in just over a year,” Tindall said. “If this happens, the average borrower with a $500,000 debt at the start of the hikes could be looking at a total increase in their monthly repayments of over $1,000. That’s not exactly spare change they’ll be scraping around for month after month.”
