Double trouble: RBA tipped to hike by another 0.50% in July

Australians with mortgages need to be prepared for their repayments to rise significantly, with the RBA tipped to hike again by another 0.50 percentage points next month.

Updated cash rate forecasts from CBA and Westpac economists are now predicting the RBA will hike official rates to 1.35 percent when they next meet on 5 July 2022.

NAB and ANZ believe there will be another double hike within the next two months.

Big four bank’s new cash rate forecasts: how the next months could unfold

• CBA: cash rate to rise by 0.50% to 1.35% in July and reach 2.10% by November this year.
• Westpac: cash rate to rise by 0.50% to 1.35% in July, hit 2.10% by end of this year and 2.35% by February 2023.
• NAB: cash rate to reach between 1.60 – 1.85% by August and reach 2% by end of this year.
• ANZ: cash rate to rise by 0.25% in July to 1.10%, and by 0.50% in August to 1.60% with up to two more hikes to follow in 2022.

Analysis from RateCity.com.au shows if the cash rate hits 2.10 per cent by the end of this year, as now forecast by CBA and Westpac, someone with a $500,000 mortgage today could see their monthly repayments rise by $542 in total.

For someone with a $1 million mortgage, repayments could rise by a total of $1,083.

Total increase in repayments April – December 2022

NOTE: Calculations are based over 25 years.

Source: RateCity.com.au. Calculations are estimates and repayments are for an owner-occupier paying principal and interest over 25 years. Starting rate is the RBA existing variable customer rate of 2.86% in April 2022 and Westpac’s cash rate forecasts are applied.

RateCity.com.au research director, Sally Tindall, said: “This month’s double hike is unfortunately just a taste of what’s to come.”

“The RBA wants to get the inflation genie back in the bottle and it’s prepared to do what it takes to get the job done, and quickly,” she said.

“While many borrowers have been preparing themselves for rising rates, they may not have expected the RBA would go this hard and fast.

“If you don’t think you can keep up with hikes of this magnitude, take action now. Start making cuts to your budget and consider refinancing to a lower rate while you can.

“In a couple of months’ time, some people may even find they can’t refinance their mortgage because they don’t pass the banks’ serviceability tests on the higher rates.

“Petrol prices are once again through the roof, despite the cut to the fuel excise. Grocery bills are ballooning and energy is set to spike. Families are starting to feel the heat from all angles.

“Now is the time to take stock, make some budget cuts, if needed, and if you think you are going to default on any bill put your hand up and ask for help.

“If you are in severe financial hardship there are loans and grants that can provide some relief. Centrelink has a crisis payment, while Good Shepherd might be able to provide you with a no interest loan.

“The national debt helpline is another good resource. They’re on 1800 007 007. They can put you in touch with a counsellor who can help you come up with practical ways to get on top of your debts,” she said.

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