Tuesday 2 August 2022 10:06 AM RBA interest rate rise: Commonwealth Bank ANZ Westpac NAB make predict more pain trends now
Borrowers are being urged to brace for a lot more pain this year after the Reserve Bank raised rates for the fourth straight month and hinted at more increases to tackle surging inflation.
Three of Australia's big four banks - ANZ, Commonwealth Bank and NAB - are expecting rate rises to continue until November while Westpac sees ongoing hikes until February.
But ANZ is the most severe, expecting the cash rate to hit a 10-year high of 3.35 per cent by Melbourne Cup Day.
The cash rate on Tuesday climbed by 0.5 percentage points to a six-year high of 1.85 per cent - up from a three-year high of 1.35 per cent.
The August increase was the fourth consecutive monthly increase, which means borrowers since May have copped 1.75 percentage points of pain - the most severe monetary policy tightening since 1994.
The Reserve Bank of Australia has raised rates by half a percentage point, or 50 basis points, at three straight meetings for the first time since it published a cash rate target in 1990.
Borrowers are being urged to brace for a lot more pain this year after the Reserve Bank raised rates for the fourth straight month and hinted at more increases to tackle surging inflation. Reserve Bank governor Philip Lowe (left) said the central bank 'places a high priority' on getting inflation back within the two to three per cent target
$500,000: Up $141 from $2,215 to $2,356
$600,000: Up $169 from $2,658 to $2,827
$700,000: Up $197 from $3,101 to $3,298
$800,000: Up $225 from $3,544 to $3,769
$900,000: Up $253 from $3,987 to $4,240
$1,000,000: Up $281 from $4,430 to $4,711
Increases based on Reserve Bank cash rate rising from 1.35 per cent to 1.85 per cent taking popular Commonwealth Bank variable rate from 3.39 per cent to 3.89 per cent
RBA governor Philip Lowe in a statement said the central bank 'places a high priority' on getting inflation back within the two to three per cent target.
'The path to achieve this balance is a narrow one and clouded in uncertainty, not least because of global developments,' he said.
'The outlook for global economic growth has been downgraded due to pressures on real incomes from higher inflation, the tightening of monetary policy in most countries, Russia's invasion of Ukraine and the Covid containment measures in China.'
Inflation in the year to June surged by 6.1 per cent, the fastest pace since 2001.
The consumer price index was the steepest since 1990 when the one-off effect of the GST introduction was taken out.
Both the Reserve Bank and Treasury are now expecting inflation to hit a 32-year high of 7.75 per cent by the end of 2022 and remain above the RBA target until 2024.
'The expected moderation in inflation reflects the ongoing resolution of global supply-side problems, the stabilisation of commodity prices and the impact of rising interest rates,' Dr Lowe said.
The latest RBA rate increase means a homeowner paying off an average $600,000 mortgage will have to find an additional $169 for their monthly mortgage repayments, as they climbed to $2,827 from $2,658.
The big four banks were all expecting a 50 basis point increase in August and all of them are expecting another 50 basis point rise in September, that would take the cash rate to a seven-year high of 2.35 per cent.
The ANZ bank is expecting a 3.35 per cent cash rate by November, which would mean 50 basis point rate rises in September, October and on Melbourne Cup Day (pictured is a Sydney branch)
But the ANZ bank is expecting a 10-year high 3.35 per cent cash rate by November, which would mean 50 basis point rate rises in September, October and on Melbourne Cup Day.
Should that prediction materialise, a borrower with a $600,000 mortgage would see their monthly repayments climb by another $708, compared with where they are now, before the banks adjust their variable mortgage rates to account for the RBA's latest 50 basis point increase.
A 3.35 per cent cash rate would also mean this same borrower would be paying $1,060 more a month by November, compared with May when the cash rate was still at a