Back in September I reviewed what the economists at the four big banks (ANZ, CBA, NAB & WBC) predicted the cash rate would max out at. At that time the cash rate was 2.35% and now in February 2023 that rate has increased by 1% to now sit at 3.35%. The Reserve Bank of Australia put the cash rate up 0.25% in October, November, December & now February. Let’s review below how the predictions of the big four backs fared:
What’s interesting is in how a period of time as short as 6 months how drastic the lenders predictions have changed. All of ANZ, CBA & NAB initially predicted that by late 2022 the cash rate would peak. WBC were the only bank to predict that there would be further increases in 2023 and it appears that their prediction of 3.60% cash rate in March 2023 will be very close (assuming the RBA do increase the cash rate by 0.25% at the March meeting).
Early predictions yielded different results between the four banks with CBA (2.85%) & WBC (3.60%) being the outliers. Fast-forward to today and there seems to be more of an ‘agreeance’ between the banks with three of them predicting a peak of 3.85%, NAB being the only outlier predicting a further 0.25% increase on top of this. As outlined in the initial article, these are predictions only and shouldn’t be relied on – but why the drastic change over a short period of time?
The main reason is the economy has remained more resilient to both higher inflation and interest rates than initially anticipated. Initially it was thought that policy would have a direct impact to the economy, but it has proven to be slower than originally anticipated which is likely due to a string of reasons such as a large quantity of mortgages being on cheap fixed rates, households’ large savings buffers and a summer holiday season without social restrictions for the first time since the COVID lockdowns. Whilst it is the opinion of several economists that ‘inflation has peaked’, it’s hard to know how long it will take to moderate. One thing we can be sure of is that rates are going to increase over the coming months off the back of the statement from the RBA board where they stated that we should ‘expect further increases in interest rates in the months ahead’.
Your home loan isn’t something you should procrastinate because it could end up costing you hundreds, if not thousands. To discuss your loan, please call me at any time on 0401 225 713 or email lmckean@lbkprivatelending.com.au