Several of the big banks have pivoted on their rate outlook, and are now predicting rate hikes (rather than no change or a fall) this side of Christmas. It could be a cue for homeowners to plan rather than panic.
After three back-to-back rate hikes earlier this year, homeowners have enjoyed a welcome break from further rate rises in recent months.
But the reprieve may be short-lived.
Three of Australia’s four biggest home loan lenders have sounded the alarm on possible rate hikes, which could happen before Christmas.
We look at what’s driving the forecasts, and how you can plan ahead.
Inflation remains higher than expected
The Reserve Bank of Australia (RBA) has made it clear that it’s aiming for inflation of 2-3%, and only weeks ago, the RBA signalled it will “do what it considers necessary” to bring inflation down.
The trouble is, inflation is proving remarkably stubborn.
The latest CPI figures show inflation is currently sitting at 3.5%, and while it’s on a steady downward trend, 3.5% is still well above the RBA’s preferred range.
That’s seeing the major banks rethink their rate expectations.
Rates could rise as early as September
While the big banks hold differing views on the timing of possible rate movements, the common thread is that the next move may be up, rather than down.
NAB, for example, is expecting a 0.25% rate increase in just a few weeks – when the RBA Board meets in late September.
The Commonwealth Bank and ANZ Bank also expect the RBA to lift the cash rate by 0.25%, though not until November.
Among the four major banks, Westpac alone holds the view that the next move for rates will be down – though it’s not expecting rates to fall until September 2027.
How a rate rise could impact your home loan repayments
If three of the four big banks are right, and rates rise by 0.25% over the next few months, this would see the RBA’s cash rate climb from 4.35% at present to 4.6% by year’s end.
We haven’t seen the cash rate at that level since 2010.
If it happens, a 0.25% rate hike could add around $91 to monthly repayments on a $600,000 loan with 25 years remaining, according to an analysis by Canstar.
On a $800,000 loan, monthly repayments could rise by $121, and on a $1 million mortgage with a 25-year term, a 0.25% rate hike could add $152 to monthly repayments.
What you can do now to prepare
No one can say with certainty if we will see a pre-Christmas rate hike.
But it certainly doesn’t hurt to plan ahead.
The first step is to check your current rate.
This gives you a baseline figure to gauge if you are paying more than necessary – regardless of any possible future rate hikes.
As a benchmark, today’s average variable home loan rate is 6.65%.
Close to 50 lenders are currently offering variable home loan rates below 6%.
Not all these loans will be suitable for every borrower.
Even so, it highlights the level of competition in today’s mortgage market – and a benchmark for what’s potentially available.
Why wait for possible future rate hikes?
We can let you know today if you could save by refinancing to a new loan and lender. Or, we could assist with asking your current lender to match what else is out there in the market.
Call us to find out how your current loan shapes up, and whether you may be able to access a more competitive home loan rate or improved loan features.
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