The average mortgage holder could end up paying a total of $1,135 extra in monthly repayments since the start of the Reserve Bank’s (RBA) interest rate hikes, if NAB’s new cash rate forecast is realised.
NAB has predicted a further three RBA hikes in the next three months, taking the cash rate to a peak of 4.10 per cent by May, 2023.
If this happens, the average variable borrower with a $500,000 debt at the start of the hikes could see their mortgage repayments rise by an extra $227 per month in the next three months, and a total of $1,135 extra per month since the start of the hikes. This would be a whopping 49 per cent increase to repayments in just over a year.
“Forget about bill shock on your energy invoice or at the supermarket – that’s an almost 50 per cent rise to what is typically a household’s biggest recurring expense,” Tindall said.
“While a cash rate of 4.10 per cent is by no means a done deal, it’s something borrowers should start preparing for.
“If you’ve got a mortgage, ask your bank what your monthly repayments will be if your interest rate rises by a further 0.75 percentage points. That’s the number you could need to fit in your budget by May.”
On the bright side, all four of the major banks - CBA, ANZ, NAB and Westpac - are expecting a series of rate cuts a few months after they hit their peak. But Tindall warned any potential relief was not guaranteed.
“No one knows for certain what the cash rate will do over the next 12 -18 months, however, a bit of prudent planning ahead of time will give you the confidence that you’ve got this, come what may,” she said.
Big Four bank forecasts: How high will the cash rate go and when?
CBA: 0.25 per cent hikes in March and April, peaking at 3.85 per cent. Then 0.25 per cent cuts in November and December, 2023, and February and May, 2024.
Westpac: 0.25 per cent hikes in March and May, peaking at 3.85 per cent. Then 0.25 per cent cuts in February, May, August and November, 2024.
NAB: 0.25 per cent hikes in March, April and May, peaking at 4.10 per cent. Then 0.25 per cent cuts in February, March, April and May, 2024.
ANZ: 0.25 per cent hikes in March and May, peaking at 3.85 per cent. One 0.25 per cent cut in November, 2024.