In a recent move aligning with other major financial institutions, the Commonwealth Bank has revised its forecast for the cash rate. The bank now anticipates the Reserve Bank of Australia (RBA) will increase the cash rate by 0.25 percentage points this Tuesday, with another rise expected in May.
National Australia Bank (NAB), Westpac, and the Commonwealth Bank are predicting consecutive rate hikes over three meetings. It’s worth noting that the central bank is not scheduled for a meeting in April.
Contrastingly, ANZ Bank maintains a different outlook, predicting the RBA will delay any rate increase until May. They argue that the uncertainty regarding the full impact of previous hikes on inflation presents a complex decision-making process for the RBA.
Should the RBA proceed with a rate hike on March 17, a homeowner with a $600,000 mortgage over a 25-year period would see their monthly payments rise by approximately $91.
This scenario would result in a total increase of $181 per month if there are two rate hikes this year, in February and March, or $272 monthly if three hikes occur.
According to data from Canstar, lenders have already started to adjust in response to these anticipated changes.
In the past two weeks, 20 lenders have lifted a total of 369 fixed mortgage rates ahead of Tuesday’s RBA Board meeting, a strong sign banks are preparing for another increase.
Term deposit rates, often seen as an early indicator of rate moves, have also shifted.
Data insights director Sally Tindall (pictured) said the revised outlook by banks reflects the RBA’s growing unease over a jump in headline inflation, driven largely by rising oil prices
The RBA Board, led by Michele Bullock (pictured) has its work cut out for it next week
Based on an owner-occupier paying principal and interest with 25 years remaining if banks pass on the hikes
Canstar tracking shows 41 banks have increased 184 term deposit rates over the same two-week period.
Canstar data insights director Sally Tindall said CBA has joined NAB and Westpac in tipping another rate hike on Tuesday, following comments from the RBA’s Deputy Governor, Andrew Hauser, which reiterated the central bank’s determination to rein in ‘toxic’ inflation.
The revised outlook reflects the RBA’s growing unease over a jump in headline inflation, driven largely by rising oil prices.
Crude oil surged to almost $US120 a barrel earlier in the week as the escalating conflict in the Middle East threatened prolonged disruption to the Strait of Hormuz, a key corridor for around 20 per cent of the world’s energy supply.
‘He did, however, acknowledge more than once that it would be a line-ball call, saying the Board has its work cut out for it next week,’ Ms Tindall said.
‘From a rate tracking perspective, the banks appear to be factoring in a hike. Analysis of the Canstar database shows 20 lenders have increased close to 400 fixed rates in the past fortnight, while 41 banks have hiked 184 term deposit rates.
‘That’s two very loud canaries in the coal mine right there.’
It marks a sharp shift from earlier expectations of a single move in May, with three of the four big banks now tipping the cash rate to peak at 4.35 per cent.
The RBA will announce its next interest rate decision on March 17, with another in May
A rate hike on March 17 would mark the second RBA increase in as many meetings, and Ms Tindall warned the banks are not predicting the hikes will stop there.
‘CBA, Westpac and NAB all believe we’ll see another hike in May, which would make it three hikes in as many meetings,’ she said.
‘For a borrower lugging around a $1million debt, this could translate into an increase to their minimum repayments of almost $500, at a time when they’ll likely be paying more for petrol and other everyday essentials.
‘If you have a mortgage, start preparing for higher rates.’
There are still more than 40 lenders offering at least one variable rate under 5.50 per cent.
‘Switch, haggle, do whatever it takes to get yourself on a lower starting rate in case the one rise we saw last month turns into a rate hike frenzy,’ said Ms Tindall.
The RBA will announce its next interest rate decision on March 17, with another board meeting scheduled for May.
