Ahead of next week’s Reserve Bank of Australia (RBA) meeting, two major banks now forecast another round of cash rate hikes that could further strain borrowing capacity for first-home buyers and property investors.
Canstar data show that a 0.25% hike in March would add about $91 a month to repayments on a $600,000 loan, assuming a 25‑year term and banks passing on the full move. If the RBA ultimately delivers three hikes across February, March, and May, monthly repayments on the same loan would be roughly $272 higher than at the start of the year.
Westpac chief economist Luci Ellis points to higher oil prices and RBA’s focus on headline inflation and inflation expectations as key reasons for bringing forward the expected tightening, despite the temporary nature of the shock. While the spike in fuel costs is seen as temporary, Westpac expects the board to respond, especially given the economy and financial markets have so far absorbed the impact.
NAB economists Sally Auld, Gareth Spence and Taylor Nugent have also revised their call, saying “the policy of least regret is to hike in March” and that “the case for a near term rate hike is clear” given the combination of higher‑than‑expected inflation, a tight labour market, and limited spare capacity in the economy.
The shift also reflects RBA’s cautious view of supply capacity and its updated mandate, which encourages a more active approach to steering inflation back to the 2% to 3% band. That could mean more frequent cash rate adjustments rather than long pauses.
Canstar’s data insights director Sally Tindall warns borrowers not to assume the tightening cycle is over.
“Borrowers hoping the worst of the rate hikes are behind them might need to brace themselves, with NAB and Westpac now tipping the RBA could ratchet up the pressure as soon as Tuesday,” Tindall said.
She also noted that “the split among the big four forecasts highlights just how uncertain the outlook currently is.”
“The RBA is walking a tightrope between tackling persistent inflation and avoiding pushing too hard,” Tindall said.
With a March move “not a done deal”, borrowers are being urged to stress-test their budgets at mortgage rates at least 0.5 percentage points higher, and to ensure existing loans remain competitive ahead of any further RBA action.
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