On the back of the latest Reserve Bank of Australia (RBA) cash rate hike, Australia’s major banks are now expecting more pain ahead for borrowers, with another hike of between 0.25 and 0.5 per cent predicted next month.
Three of the big four banks also expect the cash rate to rise above 3 per cent by the end of the year.
NAB expects the RBA to hike to 3.10 per cent by November, while ANZ and Westpac expect the cash rate to hit 3.35 per cent by February 2023.
CBA has consistently been the least hawkish of the major banks and expects a 0.25 per cent cash rate rise in October and a peak of 2.85 per cent in November.
When he appeared at a House of Representatives Standing Committee in Canberra last week, RBA Governor Dr Philip Lowe indicated rates could rise again next month, and that the Board is considering a 0.25 or 0.50 percentage point increase at this meeting.
RateCity.com.au research director, Sally Tindall, said she thinks the RBA might need to hike a lot harder to get inflation under control.
“There’s every chance the Board will need to hike the cash rate above the neutral mark in order to control inflation, only to trim it back down in late 2023 or 2024,” Ms Tindall said.
“Australians should prepare for the cash rate to hit 3.35 per cent in the next six months, potentially even higher, as the RBA does what it can to get inflation back under control,” she said.
Ms Tindall said the RBA has a difficult job to try and slow rising consumer prices.
“The RBA does not have an enviable job in reigning in inflation,” she said.
“It’s trying to tame a beast using a very blunt instrument, while attempting to keep the economy on an even keel.”
According to Ms Tindall, higher interest rates will eventually hit homeowners.
“Three of the big four banks now predict the cash rate will be above 3 per cent by Christmas,” she said.
“By early next year, the average borrower could see a total increase of more than $900 a month to their mortgage repayments.”
There could potentially be some relief on the way for borrowers, with the majors also expecting the RBA to eventually reverse course.
CBA expects two 0.25 per cent cash rate cuts in August and November 2023, Westpac four 0.25 per cent cuts in 2024 and ANZ two 0.25 per cent cuts in 2024.
So far NAB hasn’t predicted any cash rate cuts.