The big four bank is now expecting consecutive 0.50 per cent increases to the cash rate between August and November.
ANZ’s updated prediction trumps the Commonwealth Bank’s forecast delivered last Friday (15 July), which prophesied a cash rate of 2.60 per cent, and expects the official cash rate to hit 3.35 per cent come the penultimate month of the year.
The forecast comes as the Reserve Bank of Australia (RBA) said in its July minutes that, in line with the actions of the U.S Federal Reserve, which hiked its target range, and the European Central Bank, which is expected to follow suit at its Thursday (21 July) meeting, it is prepared to do whatever is necessary to wrangle inflation.
The forecast represents a significant shift in thinking from the bank’s economic team, which had previously stated its expectations that the cash rate wouldn’t hit 3 per cent until early 2024.
Off the back of ANZ’s predictions, RateCity has concluded that an individual with a $500,000 mortgage in May, prior to the introduction of the inflation-fighting rate rises, could see their monthly repayments rise by $909 should the bank’s predictions come to fruition.
When this scenario is doubled, and the mortgage is blown out to $1 million dollars, monthly repayments could rise by a total of $1,818 to $6,488.
RateCity research director Sally Tindall said that while there is no certainty around where the cash rate will sit come Christmas time, borrowers should brace for more rate pain and act accordingly.
“ANZ now believes the cash rate could hit 3.35 per cent by November — that would be a rise of 3.25 percentage points in the space of seven months,” she said.
“With central banks hiking official rates around the world, it’s difficult to see the RBA doing anything less than a double hike in August.
“Borrowers know rate hikes were coming but the size and pace of them has shocked households.
“Many families are already under the pump with skyrocketing grocery and petrol costs. Hefty increases to mortgage repayments, on top of this, could tip some into the red.”
She strongly advised borrowers who believe they would be unable to manage their monthly mortgage repayments in the environment of extreme rate rises to “take action now”.
Ms Tindall concluded by providing seven tips for anyone worried about the financial implications brought about by rising mortgage repayments, which are:
- Don’t panic – keep making your repayments
- Haggle for a better rate
- Shop around
- Tighten your belt
- Review your other bills
- Push for a pay rise
- Ask for help early
