Westpac is predicting the Reserve Bank of Australia (RBA) will hike interest rates again next month, by 0.40 per cent, to 0.75 per cent.
This is significantly higher than the 0.25 per cent increase expected by many other analysts.
“We think now is the time to get ahead of the curve, to take account of the unexpectedly robust surge in inflation and take strong action now to contain those pressures and contain expectations about how long those pressures will last,” Westpac said.
“We then expect multiple increases through the remainder of the year, with the cash rate peaking at 2.25 per cent in May, 2023.”
Also read: $257 in interest: The rate hike winners
The RBA hiked the cash rate for the first time in 12 years at its May meeting, in response to a surprising lift in inflation.
A further hike is expected on June 7, when the RBA board meets again.
Banks pass on rate hike
All four of the big banks decided to pass on the May cash rate hike in full to their variable-rate-mortgage customers.
RateCity data found that after the May hike monthly average repayments for someone on the average variable rate of 2.92 per cent over 25 years would rise by:
$500,000 loan - $65 a month
$750,000 loan - $98 a month
$1 million loan - $130 a month
“The RBA is likely to lift the cash rate multiple times over the next six to 12 months as it works to bring inflation back under control,” RateCity research director Sally Tindall said.
“If the cash rate gets to 2 per cent by May next year, then someone with $500,000 owing on their loan today and 25 years remaining could be looking at a total increase to their monthly repayments of $511.
“That’s going to be a lot for many borrowers to swallow, particularly anyone already struggling to make the monthly budget add up.”