Westpac forecasts higher interests rates: Borrowers warned to brace for higher repayments
Monthly repayments could soon cost borrowers a lot more cash if Westpac’s predictions for rate rises do come to fruition.
Bill Evans, the bank’s senior economist, has forecast that the cash rate could rise up to 1.75 per cent by March 2024.
He expects the first interest rate hike to take place as early as August 2022, when the cash rate will climb to 0.25 per cent from 0.1 per cent, followed by a subsequent increase to 0.5 per cent in October.
If Westpac’s predictions are indeed correct, by the end of October, the average variable rate borrower with a mortgage balance of $500,000, who has 25 years left on their loan and with the principal paid off during this period, could see their monthly payments climb by at least $103 per month.
Giving home owners a heads-up, RateCity’s research director Sally Tindall has asked mortgage holders to anticipate higher borrowing costs and to expect the worst-case scenario.
“While the exact timing of the next cash rate hike is still not certain, borrowers need to know that rates are on the rise – it’s just a matter of when,” said Ms Tindall.
However, the Reserve Bank of Australia has remained firm on its stance that the cash rate will not rise until at least 2023.
Impact of forecast cash rate hikes on average variable rate borrower, October 2022
|
Balance owing |
Repayments today |
Repayments - October 2022 |
Difference |
|
$500,000 |
$2,366
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|
$2,469 |
$103 |
|
$750,000 |
$3,549 |
$3,703 |
$154 |
|
$1m |
$4,732 |
$4,938 |
$206 |
Note: Based on an owner-occupier paying principal and interest on the average existing customer variable rate of 2.98 per cent and 25 years remaining. Loan size is based on the amount owing in January 2022. Rate hikes are based on Westpac forecasts published 20.01.22.
Impact of forecast cash rate hikes on average variable rate borrower, March 2024
|
Balance owing |
Repayments today |
Repayments - March 2024 |
Difference |
|---|---|---|---|
|
$500,000 |
$2,366 |
$2,793 |
$427 |
|
$750,000 |
$3,549 |
$4,190 |
$641 |
|
$1M |
$4,732 |
$5,586 |
$854 |
Note: Based on an owner-occupier paying principal and interest on the average existing customer variable rate of 2.98 per cent and 25 years remaining. Loan size is based on the amount owing in Jan 2022. Rate hikes are based on Westpac forecasts published 20.01.22. Assumes rate hikes in 2023 and 2024 occur at the end of each quarter.
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