Is another double-whammy rate rise on the way? The banks weigh in

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

According to new research from RateCity, should Westpac’s prediction come to fruition, the average borrower with a $500,000 loan before the beginning of the RBA’s rate hikes in May could soon be paying $834 more a month for their mortgage. 

This figure rises to $1,251 when that loan is raised to $750,000, and $1,668 for a $1 million loan.

If the RBA sticks with a 0.25 percentage point lift, it’s a slightly better scenario for mortgage holders sitting on variable rate loans; the average borrower with a $500,000 loan back in May would wind up paying $760 more a month for their mortgage.

On a $750,000 loan, this fee rises to $1,140, while that sum would rise to $1,520 on a $1 million loan.

So, where do each of the big 4 predict the end of the cash rate cycle to be?

CBA believes rates will stop rising once the cash rate hits 3.10 per cent. Over at NAB, the expectation is that the cash rate will hit a ceiling of 3.60 per cent. Both ANZ and Westpac have expectations that the RBA could push rates to as much as 3.85 per cent throughout the first half of next year.

In the event the cash rate does hit 3.85 per cent, RateCity’s data indicates that the average borrower with a $500,000 loan at the start of the hiking cycle will be subject to a 45 per cent increase to their monthly repayments — equivalent to $1,059. 

Ms Tindall explained that “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 over-indebted families into financial stress. With such a precarious and uncertain path ahead, the RBA may need to change tack at any time,” she said. 

She said the latest inflation figures “might have thrown a spanner in the works; however, it is unlikely to be enough to throw the RBA off course entirely”. Though she did note that “the option of a double hike is very much a live one.” 

Ms Tindall concluded with a message for borrowers to work out how a seventh consecutive rate hike will impact their budget and “where possible, start making those higher repayments now to prepare yourself”.