ANZ tips next rate rise to be 50 basis points

One of Australia’s biggest banks has tipped another 50 basis point cash rate rise in August as the Reserve Bank of Australia moves swiftly to put a lid on rising inflation.

In an announcement following this week’s 0.5 per cent cash rate hike to 1.35 per cent, ANZ Head of Australian Economics David Plank said the bank had previously predicted a 25 basis point increase in August.

“Job vacancies and ANZ Job Ads indicate the labour market is still tightening, increasing the urgency of the RBA’s need to get to at least neutral,” he said.

“Other factors in our expectation it will maintain the unprecedented 50 basis point pace of tightening over three meetings are: robust household spending in June despite weak consumer confidence and a Q2 inflation print that likely points to 7 per cent year-on-year inflation being reached in Q3 rather than Q4.”

But Mr Plank said the bank had not deviated from its prediction that the cash rate would end 2022 at 2.35 per cent.

“We view the 50 basis point move in August as a ‘bring-forward’ on our previous call, rather than a move to a higher terminal rate,” he said.

“We see a smaller 25 basis point hike in September as the cash rate moves into the 2-3 per cent range that Assistant Governor Chris Kent recently said was the RBA’s current estimate of where the neutral cash rate lay. 

“A pause in October is followed by 25 basis points in November on updated RBA forecasts, with the cash rate target ending the year at 2.35 per cent − the same level we expected prior to this week’s decision.”

Mr Plank said the bank then expected the cash rate to rise to 2.6 per cent in February before a pause with rate rises resuming in late 2023 and the cash rate lifting to 3.1 per cent in early 2024. 

Meanwhile, Senior Editor of Money at Finder, Sarah Megginson, said refinanced loans reached a record high of $19 billion in May and more homeowners were expected to follow suit as mortgage pain grew.

“For some, it’s a case of refinance or default on their debt,” she said.

“Households are in a very precarious position right now struggling with the worst cost of living crisis in decades.”

A Finder survey of homeowners this month shows 18 per cent have refinanced their home loan in the past six months and the same proportion plan to do so in the next six months.

About 17 per cent of mortgage holders “have no idea” what their home loan interest rate is, while a further 45 per cent only have a general idea.

Ms Megginson said interest rate increases usually came with a 30-day grace period, giving mortgage holders time to assess their options.

“There’s still a lot of competition in the home loan market and you could save hundreds every month by moving to a lender with a cheaper rate,” she said.

“Refinancing your home loan could be your saving grace.”

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Kylie Dulhunty

Kylie Dulhunty is the Deputy Editor at Elite Agent.