Economists are split on just how many Reserve Bank increases are ahead of us, with RateCity.com.au expecting four more OCR hikes to come.
Following the lower-than-expected 0.25-percentage-point hike last week, three of the four big banks have revised their forecasts.
ANZ now predicts the OCR to peak at 3.6% in May next year, up from its previous forecast of 3.35% by the end of this year, as it noted that reducing the pace of the hikes increases the risk that more hikes will be needed.
Westpac still believes the OCR will hit 3.6% but has pushed back the peak until March next year.
NAB has kept its 3.1% peak prediction but has pushed it back from November to February 2023.
CBA’s cash rate outlook remains unchanged, forecasting the peak at 2.85% next month.
If these forecasts are realised, the average borrower’s monthly repayments could increase by a total $760-$983, analysis from RateCity.com.au showed.
See table below for the total increase to repayments from May 1 to peak on big four bank forecasts.
|
Loan size |
CBA |
Westpac |
NAB |
ANZ |
|---|---|---|---|---|
|
$500,000 |
$760 |
$983 |
$833 |
$982 |
|
$750,000 |
$1,140 |
$1,474 |
$1,250 |
$1,473 |
|
$1 million |
$1,520 |
$1,966 |
$1,667 |
$1,964 |
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.
“There could still potentially be four more standard RBA hikes ahead of us,” said RateCity.com.au research director Sally Tindall. “Make certain you’re ready for these hikes by checking what your monthly repayments will be if your rate rose by another 1% after this hike.”
Tindall urged borrowers to put their budget to the test by making these higher repayments now to see how it holds up and to start making changes today if the numbers don’t add up.
“Open your banking app up and look at where your money is going,” she said. “Start by targeting the big expenses because that’s often where biggest savings can be found… Renegotiating your most expensive bills are likely to save you a lot more money each month. For people who haven’t had a decent pay increase in a while, now is the time to talk to your boss. Unemployment is around the lowest rate in nearly half a century – this might help you negotiate. If you’re worried about affording your home loan, call your bank before you miss a payment, to see what options you have.”
