RBA double hike back on the cards: Westpac

Westpac is the last of the big four banks to update its cash rate forecast on the back of yesterday’s higher than expected inflation figures, with the bank now predicting a 0.50 percentage point RBA hike on Tuesday.

CBA, NAB and ANZ’s economic teams all increased their cash rate forecasts yesterday, but still expect a standard 0.25 percentage point hike next week.

If Westpac is correct, and the RBA goes back to a double hike, the average borrower with a $500,000 loan before the hikes started in May could soon be paying a total of $834 more a month.

0.50% RBA HIKE IN NOVEMBER: Increase in monthly repayments

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

However, a standard 0.25 percentage point hike is still widely tipped by others to be the outcome of Tuesday’s meeting.

0.25% RBA HIKE IN NOVEMBER: Increase in monthly repayments

Source: RateCity.com.au. Based on an owner-occupier paying principal and interest with 25 years remaining. Starting rate is the RBA av. existing owner-occupier variable rate of 2.86% in April and assumes banks pass the hikes on in full.

How high do each of the big four banks expect the cash rate to go?

CBA expects the RBA will stop hiking the cash rate when it reaches 3.10 per cent, NAB predicts the cash rate will reach 3.60 per cent, while Westpac and ANZ expect the cash rate to go as high as 3.85 per cent in the first half of next year. See each of the banks’ full forecasts below.

If Westpac’s forecast is realised, analysis from RateCity.com.au shows the average borrower’s monthly repayments could rise in total by $1,059 in less than 12 months – that’s a 45 per cent increase in their monthly repayments.

Total increase to repayments 1 May 2022 to peak

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 big four bank cash rate forecasts are applied.

RateCity.com.au research director, Sally Tindall, said: “Westpac’s economic team has gone against the tide, tipping the RBA to revert back to a double hike in November.”

“If this happens, the average variable borrower with a $500,000 debt, would see their repayments lift by an additional $150 per month and over $1,000 across seven months’ worth of rate hikes,” she said.

“All four big banks have now increased their cash rate forecasts on the back of yesterday’s surprise inflation figures, however, CBA, NAB and ANZ economists all still predict a standard 0.25 percentage RBA rise next week. 

“The RBA has made it clear it is not on a pre-set path but instead is making each cash rate decision as to the size and the timing of the hikes based on the incoming data.

“Reverting back to half a percentage point hike would get the job done faster, however, it also has the capacity to tip more overindebted families into financial stress. With such a precarious and uncertain path ahead, the RBA may need to change tack at any time. 

“Wednesday’s higher than expected inflation figures might have thrown a spanner in the works, however, it’s unlikely to be enough to throw the RBA off course entirely. While it’s more likely the Board will stick with a standard quarter of a percentage point hike, the option of a double hike is very much a live one.

“Either way, borrowers are staring down the barrel of their seventh rate hike in seven months, with at least another one to follow that. Work out what that will mean for your budget, and where possible, start making those higher repayments now to prepare yourself,” she said.

Big four bank RBA forecasts

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