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NAB predicts more interest rate pain for Aussie borrowers

Economists at the big four banks have predicted how the Reserve Bank will handle another rate rise this month.

A National Australia Bank (NAB) sign adorns a branch office in Melbourne on November 9, 2021. (Photo by William WEST / AFP) (Photo by WILLIAM WEST/AFP via Getty Images)
NAB economists are predicting another rate hike next month. (Source: AFP via Getty Images) (WILLIAM WEST via Getty Images)

Australia's four big banks are predicting the Reserve Bank of Australia (RBA) will keep the cash rate on hold tomorrow but one is forecasting more interest rate pain for borrowers next month.

National Australia Bank (NAB) has predicted the 4.10 per cent cash rate will be increased for the 13th time next month after the release of the quarterly inflation figures.

The average borrower with a $500,000 loan would be paying $1,210 more a month on their mortgage if there was another 0.25 per cent increase compared to the record low in May last year.

If their loan was a million dollars, which is still under the average cost of a Sydney home, that monthly figure balloons to $2,421.

This is assuming the banks would pass on the rate rise in full.

Finance expert David Koch agreed the RBA was likely to hold the cash rate but warned Australians were being "put on notice".

"They don't want the job market to get too tight because that will push up wages and feed into inflation," he told Yahoo Finance.

“On the other side of it, they are really concerned that Australian households have gone into the bunker - they're tightening their belts and the slowing down of the economy is really accelerating."

The big banks' interest rate predictions

Commonwealth Bank

Tomorrow’s interest rate decision: Hold

Cash rate peak: 4.10 per cent

First rate cut: May 2024


Tomorrow’s interest rate decision: Hold

Cash rate peak: 4.10 per cent

First rate cut: Q3 2024


Tomorrow’s interest rate decision: Hold

Cash rate peak: 4.35 per cent

First rate cut: August 2024


Tomorrow’s interest rate decision: Hold

Cash rate peak: 4.10 per cent

First rate cut: November 2024

Are Aussies coping after the mortgage cliff plummet?

Another 150,000 mortgages are yet to follow the estimated 730,000 to have come off ultra-low fixed rate this year, according to a RateCity analysis.

RBA data shows 450,000 more will come off their fixed rates in 2024.

However, the latest APRA data shows only a slight increase in loans being past due which means borrowers are largely handling the rate spike.

“APRA has said it expects this figure will increase through to the end of the year as people realise they can’t keep up with the higher repayments,” RateCity research director Sally Tindall said.

“If that’s you – make sure you tell your bank before you trip up.”

Tindall said some Australians managed to create a “healthy financial buffer” while on a low rate, while others are successfully renegotiating their loans to “soften the blow”.

“If you are one of the lucky ones still on an ultra-low fixed rate, make hay while the sun is still shining,” she said.

“You can do this by tipping extra into your mortgage up to a certain amount, or save it in a safe place such as a high interest savings account. That way you’ll have a buffer at the ready for when you do finally have to face the reality of higher interest rates.”

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