Westpac has predicted a half-percent rate hike from the Reserve Bank of Australia on Tuesday, joining the rest of the big four in updating their cash rate forecasts after inflation once again rose above their expectations.
CBA, NAB and ANZ had previously increased their cash rate forecasts but agreed RBA would settle with a standard 0.25% hike. Latecomer Westpac has outdone them all with a bleak 0.5% prediction. Another double hike from the RBA would see the average Aussie borrower with a $500,000 loan and 25 years remaining paying an additional $834 a month, RateCity.com.au reported.
Westpac’s was a minority view, however, as most experts settled on a rate hike prediction of 0.25%.
Read more: Borrowers should prepare to pay more on their mortgages – expert
Big four opinions diverged on how high the RBA would allow the cash rate would go.
CBA expected the RBA to cap the hike at 3.1%. NAB predicted the cash rate would reach 3.6%, while ANZ and Westpac expected it to hit 3.85% by the first half of 2024.
Computing an owner-occupier’s monthly repayment on a loan with 25 years remaining at the starting RBA variable customer rate of 2.86% in April, RateCity.com.au followed Westpac’s forecast to its conclusion and found that the average borrower’s monthly repayment could rise by more than $1,000 – a 45% increase in monthly repayments – in under a year.
“All four big banks have now increased their cash rate forecasts on the back of yesterday’s surprise inflation figures, [with] CBA, NAB, and ANZ economists all still [predicting] a standard 0.25 percentage RBA rise next week,” said RateCity.com.au research director Sally Tindall. “The RBA has made it clear it is not on a pre-set path but instead is making each cash rate decision as to the size and the timing of the hikes based on the incoming data.”
Read more: Australia set for fourth half-point rate increase
While Tindall agreed that reverting to a half-percentage-point hike would “get the job done faster”, she pointed out that it could potentially tip more over-indebted families into financial stress.
“With such a precarious and uncertain path ahead, the RBA may need to change tack at any time. Wednesday’s higher-than-expected inflation figures might have thrown a spanner in the works; however, it’s unlikely to be enough to throw the RBA off course entirely. While it’s more likely the board will stick with a standard [0.25%] hike, the option of a double hike is very much a live one,” Tindall said.
Either way, Tindall added, borrowers would be facing their seventh rate increase in as many months. “Work out what that will mean for your budget and … start making those higher repayments now to prepare yourself,” she said.
