The big four banks all seem to be in agreement that Australians are about to get slammed with another significant interest rate hike.
On Tuesday, the Reserve Bank of Australia will hold its first monthly meeting of the year where it is widely expected to increase the interest rate by 0.25 per cent.
Economists from the Commonwealth Bank, Westpac, NAB and ANZ all have independently concluded a 25 basis point increase is the most likely outcome.
Although the CBA did warn that was a 25 per cent chance of a 40 basis point hike.
That’s bad news for homeowners across the country who were already hit with eight consecutive rate hikes last year.
Were rates to rise according to economists’ projects on Tuesday afternoon, analysis from Canstar found that for the average Australian on a $500,000 mortgage, their monthly repayments will jump by $969 per month or $11,628 per year.
For homeowners stuck with a $1 million home loan, they’ll be lumping out an extra $1,939 a month, which is $23,268 over the next 12 months.
Currently, the cash rate sits at 3.1 per cent, a significant leap from its pandemic low of just 0.1 per cent.
With a 0.25 basis point rise, the cash rate would rest at 3.35 per cent.
ANZ and Westpac both have forecast for the cash rate to peak in May once it reaches 3.85 per cent.
They expect two more rate rises after the February meeting to reach the terminal rate before Australians will get a reprieve.
NAB had a better prediction for struggling homeowners, forecasting that homeowners only have to endure two more months of rises.
The bank’s economists said by March, the interest rate will have peaked at 3.6 per cent.
The Commonwealth Bank had the most optimistic prediction of all, suggesting that interest rates could peak on Tuesday afternoon but then pause while the RBA reassessed and waited for more reports on inflation.
Meanwhile, a smaller bank, Deutsche, had a much more grim prediction, warning the rate would peak at 4.1 per cent all the way in August.
Chief economist of Deutsche Bank, Phil O’Donaghoe said last week that Australia’s central bank will hike up prices in February, March, May and August.
Comparison website Canstar also had a morbid forecast; Based on historical interest rates in the past 33 years – the average peak rate has been 4.6 per cent – which is 1.5 per cent higher than the current cash rate of 3.1 per cent.
This could signal more rate pain on the way with the equivalent of six more 0.25 per cent rate rises meaning mortgage holders would be slugged with an extra $498 on monthly repayments for a $500,000 loan. That would mean a total of $1386 added to repayments since April 2022.
Last week, Craig James, an economist at CommSec, a branch of the CBA, shot down the worst-case scenarios that were being projected.
“I think Deutsche Bank are at the gloomy end of predictions,” Mr James told Sunrise last week.
“You’ve got to remember; we’ve had eight interest rate hikes in a row.
“We’ve gone from 0.1 of a per cent to 3.1 per cent in super quick time, we haven’t seen an aggressive reserve bank like this ever before.
“At some point in time, it’s got to slow the economy down and in our calculations, consumer spending is already starting to slow down.”