In September 2022 & February 2023 I reviewed what the economists at the four big banks (ANZ, CBA, NAB & WBC) predicted the cash rate would max out at. Let’s check in to see what these predictions currently sit at:
Keep in mind that these are just predictions, and that the big banks are subject to change these forecasts. Figures are accurate at the time of publishing.
What’s interesting is in a period of just 10 months (from September 2022 to July 2023) how drastic the lender’s predictions have changed. All of ANZ, CBA & NAB initially predicted that by late 2022 the cash rate would peak. WBC was the only bank to predict that there would be further increases in 2023 which was correct, but they failed to predict the further cash rate hikes. Fast forward 5 months to February 2023 and they all predicted 3.85% with the outlier being NAB at 4.10%. The drastic change was because the economy remained far more resilient to higher inflation rates and interest rates than initially anticipated. Now, it appears that another 5 months on to July 2023 and that sentiment was true again. That is supported by the new predictions of 4.35% for ANZ & CBA and 4.60% for NAB & WBC which is again an increase on previous predictions. It’s certainly clear that factors such as a large quantity of mortgages being on cheap fixed rates, households' large savings buffers, and a holiday season without social restrictions were not accurately grasped which is why we’ve seen the continual increase.
The RBA will meet on Tuesday, August 1st, and many are wondering what the result will be. At the time of writing this article the cash rate is 4.10% and new findings recently released confirmed that inflation is easing. The headline Consumer Price Index (CPI) rose 6% which is lower than the 6.20% pace expected by economists. This quicker then expected slowdown has led many to speculate that the RBA will pause hiking rates. Whereas others believe that a rate increase will occur on the back of the RBA’s goal to get inflation between 2-3% by mid-2025.
All eyes are on the RBA for what they’ll do next.
With rates changing regularly now is the time to make sure you’re on top of it. If you’re a first home buyer an increase of 0.25% in interest has a massive impact on servicing. If you have an existing mortgage now’s the time to make sure your rate is still competitive as it could be costing you thousands more each year without you knowing. To make sure you’re in the know contact myself on 0401 225 713 or lmckean@lbkprivatelending.com.au