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ANZ: Interest rates won’t rise again until August

One of Australia’s biggest banks has listed August as the next month when interest rates will rise, forecasting a 25 basis point hike.

In its latest Australian Macro Weekly report the ANZ said despite seeing risks to inflation, it would not be enough for the Reserve Bank of Australia to lift the cash rate in May.

“The RBA’s current stance is to take additional time to assess the impacts of the cumulative 350 basis points of hikes delivered so far, and a one-month pause is not consistent with this,” the bank said.

“The RBA will likely take comfort that headline inflation appears to be falling faster than it has forecast, with slower goods and tradables inflation.

“Our central scenario has the next hike in August, bringing the cash rate to a 3.85 per cent peak for the cycle.”

The bank said an August hike would likely be in response to “persistent stickiness” in the second quarter CPI report, which is due in late July, combined with a stronger wage outlook.

“Risks remain tilted towards a higher terminal rate in our view,” the bank said.

Meanwhile, new research from financial data and insight firm RFI Global shows that anticipated mortgage stress is at a record high.

According to RFI Global’s Australian Mortgage Council, a quarterly survey of 2000 mortgage holders), one-in-three borrowers surveyed in March expect to struggle to meet their mortgage repayments over the next 12 months.

This figure has jumped from 22 per cent in December last year.

“The significant increase in March appears to be driven by both variable rate customers feeling the impact of rate rises, as well as concern among borrowers nearing the end of their fixed rate terms,” RFI Global said in a statement.

“Some 43 per cent of borrowers whose fixed term will end in the next three months are expecting to struggle to meet repayments, compared to 24 per cent of borrowers with more than 12 months left on their term.”

RFI Global said borrowers with variable rates had already seen their costs increase and fixed rate customers would soon face the same, with higher borrowing costs and greater cost of living increases to erode savings buffers. 

“The question for consumers is whether they can take steps to reduce their spending and stretch their buffer for longer than might otherwise be the case,” RFI said.

The survey also revealed banks are facing a big challenge as mortgaged customers are becoming increasingly unhappy with service levels.

People who have a mortgage with their bank are now less satisfied than those who don’t. This is because they are not happy with the interest rates they are being charged. 

The report also shows that people who have fixed interest rates are more likely to switch to another bank when their current term ends. 

“In early 2022, the NPS of major bank MFI (main financial institution) customers who held a mortgage with their MFI was 3.5 points higher than that of major bank MFI customers who did not hold a mortgage with their MFI,” RFI Global said. 

“This gap remained stable until May 2022 (the first of the rate rises), but as early as June the NPS among mortgage customers fell, while that of non-mortgage customers remained stable. 

“Mortgage customer NPS has been lower than non-mortgage customer NPS since June 2022, and currently sits 1.3 points below that of non-mortgage customers. 

“This represents an almost 5-point turnaround in just over 12 months.”

According to the survey, the main reason for the decline in satisfaction among mortgage customers is the perception of “competitive interest rates”. 

“Mortgage customers’ rating of competitive interest rates has declined by 0.44 since May 2022,” RFI Global said.

“Other ratings related to pricing have also declined, with fair fees and charges, transparent fees and charges and ability to negotiate all falling by between 0.28 and 0.38. 

“In contrast, the rating of competitive interest rates among non-mortgage customers improved, albeit not by as much as the decline among their mortgage holding counterparts.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.