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Westpac Issues Dire Interest Rate Warning For Mortgage Holders: The Pain Will Be Even WORSE Than The Big Four Banks Expected
- Westpac now expects a cash rate of 4.1 percent
- That means the March, April and May rates increase
- Westpac, ANZ and NAB see three rate hikes
Westpac has become the last of the Big Four banks now expecting three more interest rate hikes for May.
Chief economist Bill Evans revised Westpac’s forecast for the Reserve Bank to raise interest rates in March, April and May to an 11-year high of 4.1 percent.
“At 4.1 percent, the cash rate will be in deep contractionary territory and a pause will be appropriate,” he said.
Three of Australia’s big four banks, Westpac, ANZ and NAB, now expect a 4.1 percent cash rate for May, and the Commonwealth Bank still expects a 3.85 percent cash rate for May.
Westpac has become the last of the Big Four banks now expecting three more interest rate hikes for May.
Borrowers have already endured nine straight monthly interest rate hikes since May 2022, driving the RBA cash rate to a 10-year high of 3.35 percent.
This has caused repayments on an average of $600,000 to increase by 42 percent to $3,284, versus $2,306, for someone with a 30-year loan now repaying a Commonwealth Bank loan with a variable rate of 5.17 percent.
Just over nine months ago, this borrower was paying a variable rate of 2.29 percent when the RBA cash rate was still at a record low of 0.1 percent.
But three more rate hikes would take Commonwealth Bank’s standard variable rate to 5.92 percent and send repayments up another $283 to $3,567, an increase of 54.7 percent in one year.
NAB chief economist Alan Oster suggested last week that a 4.1 per cent cash rate, as he predicts, would be close to pushing Australia into a recession, which would be the first caused by rate increases since 1991. .
“We don’t yet expect a technical recession in Australia, but with rates rising above 4 percent, it is becoming a possibility,” he said.
AMP chief economist Shane Oliver said a 4.1 percent cash rate would trigger a recession, defined as two consecutive quarters of economic contraction.
“I think a cash rate above 4 per cent would probably take the economy into recession or very close to it,” he told Daily Mail Australia.
Inflation last year soared to 7.8 percent, the most severe rise since 1990 that is also well above the RBA’s target of 2 to 3 percent.
Evans said a rate cut was possible by the end of March next year, provided Covid supply restrictions were eased.
“Going forward, the next step is likely to be a rate cut starting in the March 2024 quarter,” he said.