ANZ predicts quadruple interest rate hell for every mortgage holder

PHOTO: A two percentage point increase in mortgage rates by November 2022 is on the cards

  • ANZ predicting four 0.5 percentage point interest rate rises by November 2022 
  • Banking giant sees big increases in August, September, October and November 
  • ANZ is expecting June quarter inflation data to show biggest surge in 32 years
  • CoreLogic data showed 41.9 per cent of capital cities home markets are falling
  • The June quarter declines covered May, June rate increases but not July rise 

Banking giant ANZ is now predicting borrowers will cop four 50 basis point interest rate rises by November – with the country’s major banks expecting the cash rate to settle by 2023 once inflation comes under control.

The big four bank on Tuesday predicted Australia’s Reserve Bank cash rate will more than double from its existing three year high of 1.35 per cent to a 10-year-high of 3.35 per cent by Melbourne Cup Day.

ANZ head of Australian economics David Plank predicted the RBA would lift rates by consecutive 0.5 percentage points in August, September, October and November – and keep rates at that level throughout 2023 and 2024.

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How Australia faces a SUPER-SIZED interest rate spike in fresh hell for homeowners | WATCH

‘We think the RBA will take the cash rate target to a restrictive setting of above three per cent by late 2022, more than 12 months earlier than our previous forecast,’ he said.

A two percentage point increase in mortgage rates by November would see a borrower with an average $600,000 mortgage owe $708 more a month in repayments as the RBA cash rate reached the highest level since October 2012.

But Mr Plank said there was an outside chance the Reserve Bank would raise rates by 75 basis points at one of its meetings this year.

‘We do think a move of more than 50 basis points in August or September is a very real possibility, while not the central case,’ he said.

‘This could be a more of 75 basis points, or even 65 basis points if the RBA wanted to ’round’ the cash rate target to 0.25 per cent.’

With inflation set to soon hit the worst level in 32 years, ANZ has updated its forecasts to have the Reserve Bank cash rate more than doubling from 1.35 per cent now to a 10-year-high of 3.35 per cent on Melbourne Cup Day. ANZ head of Australian economics David Plank said this would see the RBA raise rates by 0.5 percentage points in August, September, October and November (pictured is the Seven Hills branch in Sydney's west)

With inflation set to soon hit the worst level in 32 years, ANZ has updated its forecasts to have the Reserve Bank cash rate more than doubling from 1.35 per cent now to a 10-year-high of 3.35 per cent on Melbourne Cup Day. ANZ head of Australian economics David Plank said this would see the RBA raise rates by 0.5 percentage points in August, September, October and November (pictured is the Seven Hills branch in Sydney’s west)

Since May, Australian borrowers have copped 1.25 percentage points of RBA rate rises – with the subsequent increases in June and July marking the steepest monetary policy tightening since 1994.

 

What the major banks are predicting

COMMONWEALTH BANK: cash rate to rise by 0.5 percentage points in August and reach 2.6 per cent by November 2022

Rate increases of 0.5 percentage points in September and 0.25 percentage points in November

WESTPAC: cash rate to rise by 0.5 percentage points in August, hitting 2.6 per cent by February 2023

Rate increases of 0.25 percentage points in September, November and February

NAB: cash rate to rise by 0.5 percentage points in August and reach 2.6 per cent by February 2023

Rate increases of 0.25 percentage points in September, November and February

ANZ: cash rate to rise by 0.5 percentage points in August and hit 3.35 per cent by November 2022

Rate increases of 0.5 percentage points in September, October and November

Source: RateCity 

 

Should ANZ’s forecasts come true, Australian borrowers would have copped 3.25 percentage points worth of rate increases in six months – the steepest increase since the Reserve Bank began publishing a target cash rate in 1990.

ANZ is the only big four bank whose forecasts are now in line with the Australian Securities Exchange’s 30-day interbank futures market, which is predicting a 3.35 per cent cash rate but by December.

Even so, its predictions for rate hikes in 2022 are even more aggressive than what traders are expecting.

ANZ is expecting June quarter inflation data, due out on July 27, to show the consumer price index surging by 6.3 per cent – the fastest pace since 1990.

In a possible sign of things to come for Australia, New Zealand’s inflation rate in the year to June surged by 7.3 per cent, the biggest increase in 32 years.

The Commonwealth Bank, Australia’s biggest home lender, is expecting a 2.6 per cent cash rate by November, based on a 50 basis point rise in August and September followed by 25 basis point move on Melbourne Cup Day.

Westpac has released new forecasts showing the Reserve Bank cash rate will peak at a nine-year high of 2.6 per cent by February 2023 and stay at that level until at least December 2025.

Before then, home borrowers are expected to cop another 0.5 percentage point interest rate rise in August.

Westpac chief economist Bill Evans is now predicting 0.25 percentage point rate rises in September, November and February.

Last week, he forecast pauses in September and October but Westpac has now updated its forecasts to have a quarter of a percentage point increase in September, instead of December as earlier predicted.

Mr Evans predicted the tightening cycle would resume in November, after inflation for the September quarter, due out on October 26, showed an even worse number than June quarter.

ANZ is the only big four bank whose forecasts are now in line with the 30-day interbank futures market, which is predicting a 3.35 per cent cash rate but by December

ANZ is the only big four bank whose forecasts are now in line with the 30-day interbank futures market, which is predicting a 3.35 per cent cash rate but by December

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