All of the Big Four banks have increased their interest rate forecasts, as Australia’s inflation rate hits 7.3 per cent, the highest level since 1990.
Commonwealth Bank, ANZ and Westpac have raised their cash rate predictions by 0.25 per cent, while NAB has increased its forecast by 0.50 per cent.
Westpac is now predicting a 0.50 per cent hike in November, followed by a 0.25 per cent increase in December. This would take the cash rate to 3.35 per cent by the end of the year.
The other major banks are predicting 0.25 per cent hikes in November and December.
Westpac thinks the cash rate will peak at 3.85 per cent by March 2023, while ANZ is forecasting a peak of 3.85 per cent in May 2023.
NAB and Commonwealth Bank don’t think rates will go this high. NAB is predicting the cash rate will peak at 3.60 per cent by March 2023. Commonwealth Bank is more optimistic, forecasting a peak at 3.10 per cent in December.
If ANZ and Westpac’s forecast is realised, analysis from RateCity.com.au showed the average borrower’s monthly mortgage repayments could increase by $1,058 in total (from May 2022 to May 2023) based on a $500,000 loan.
If CBA’s more moderate forecast of 3.10 per cent is accurate, then the average borrower’s monthly repayments could rise by $834.
“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,” RateCity research director Sally Tindall said.
“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.”
Tindall said mortgage owners should sit down and prepare their budget now, and stress test it against further 1-1.5 per cent interest rate hikes.