RBA Governor says more rate hikes to come - what this means for borrowers

The RBA Governor has today reconfirmed more cash rate hikes are to come as the Board continues its quest to bring down inflation.

While appearing at a House of Representatives Standing Committee in Canberra, Dr Philip Lowe indicated rates could rise again next month, and that the Board is considering a 0.25 or 0.50 percentage point increase at this meeting.

This afternoon, NAB’s economic team updated its cash rate forecast. It now expects the RBA to hike to 3.10 per cent by November.

Last week ANZ and CBA also updated their forecasts. Three of the big four banks now see the cash rate getting beyond 3 per cent by the end of the year.

Updated big four bank cash rate forecasts (see full table of changes below):

• CBA: +0.25% in Oct, peaking at 2.85% in Nov. Two 0.25% cuts in Aug and Nov 2023.
• Westpac: +0.25% in Oct, peaking at 3.35% in Feb 2023. Four 0.25% cuts in 2024.
• NAB: +0.50% in Oct, peaking at 3.10% in Nov.
• ANZ: +0.50% in Oct, peaking at 3.35% in Dec. Two 0.25% cuts in 2024.

How much could monthly repayments rise if these forecasts are realised?

Analysis from RateCity.com.au shows how much borrower’s monthly repayments could rise by if the big four bank forecasts are realised.

Loan sizes are based on a borrower’s debt at the start of the hikes, calculating the total increase from 1 May to each peak.

Total increase to mortgage repayments 1 May 2022 to Feb 2023

Source: RateCity.com.au. 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.

RateCity.com.au research director, Sally Tindall, said: “Three of the big four banks now predict the cash rate will be above 3 per cent by Christmas.”

“By early next year, the average borrower could see a total increase of more than $900 a month to their mortgage repayments,” she said.

“The RBA does not have an enviable job in reigning in inflation. It’s trying to tame a beast using a very blunt instrument, while attempting to keep the economy on an even keel.

“There’s every chance the Board will need to hike the cash rate above the neutral mark in order to control inflation, only to trim it back down in late 2023 or 2024.

“Australians should prepare for the cash rate to hit 3.35 per cent in the next six months, potentially even higher, as the RBA does what it can to get inflation back under control,” she said.

Breakdown of the big four bank RBA cash rate forecasts

Source: RateCity.com.au.

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