Westpac and NAB now expect two more back-to-back 0.50% RBA hikes

Westpac and NAB have updated their RBA cash rate forecasts today, with the banks now predicting bigger and faster rate rises over the next few months.

All big four bank economic teams now unanimously predict there will be two more 0.50 percentage point hikes in both August and September, which would total four double hikes in four months.

Updated big four banks’ RBA cash rate forecasts:

• CBA: 2.60% by Nov 2022. On a $500K loan, repayments would rise by a total of $687.
• Westpac: 3.35% by Feb 2023. On a $500K loan, repayments would rise by a total of $908.
• NAB: 2.85% by Nov 2022. On a $500K loan, repayments would rise by a total of $760.
• ANZ: 3.35% by Nov 2022. On a $500K loan, repayments would rise by a total of $909.

Breakdown of the big four banks’ RBA cash rate forecasts

Source: RateCity.com.au.

RateCity.com.au research director, Sally Tindall, said: “Borrowers need to brace for more rate pain with several substantial rises still to come.”

“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 per cent in coming months,” she said.

“If this happens, the average existing variable rate customer could be paying 6.11 per cent on their mortgage by early next year.

“Governor Lowe has made it clear the RBA will be making steady increases to our cash rate to get it back to more normal levels.

“This month’s surprising unemployment data gives the RBA more ammunition to continue with its mission to lift the cash rate. Next week’s inflation figures will also be critical in determining how hard and fast the central bank goes.

“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.

“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 2.50 per cent. Borrowers need to prepare for this new norm, rather than see it as an anomaly.

“Interestingly, Westpac is now forecasting the cash rate will climb significantly higher than 2.50 per cent, but that the RBA will cut rates in 2024,” she said.

Updated Westpac forecast

Analysis from RateCity.com.au shows if the cash rate hits 3.35 per cent by February someone with a $500,000 mortgage at the start of May could see their monthly repayments rise by $908 in total.

Westpac forecast: impact of 3.35% by Feb 2023

Calculations are based over 25 years

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA average existing owner-occupier variable rate of 2.86% on 1 May.

Updated NAB forecast

If the cash rate hits 2.85 per cent 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.

NAB forecast: impact of 2.85% by November

Calculations are based over 25 years

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA average existing owner-occupier variable rate of 2.86% on 1 May.

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