Westpac issues dire interest rate warning for mortgage holders: Pain is going to be even WORSE than the Big Four banks expected
- Westpac now expecting 4.1 per cent cash rate
- That means March, April and May rate rises
- Westpac, ANZ and NAB see three rate rises
Westpac has become the latest of the Big Four banks to now be expecting three more interest rate rises by May.
Chief economist Bill Evans has revised Westpac’s forecasts to have the Reserve Bank raising interest rates in March, April and May to an 11-year high of 4.1 per cent.
‘At 4.1 per cent, the cash rate will be in deeply contractionary territory and a pause will be appropriate,’ he said.
Three of Australia’s Big Four banks – Westpac, ANZ and NAB – are now expecting a 4.1 per cent cash rate by May, with the Commonwealth Bank still expecting a 3.85 per cent cash rate by May.
Westpac has become the latest of the Big Four banks to now be expecting three more interest rate rises by May
Borrowers have already endured nine consecutive monthly interest rates rises since May 2022, that has taken the RBA cash rate to a 10-year high of 3.35 per cent.
This has seen repayments on an average, $600,000 surge by 42 per cent to $3,284, up from $2,306, for a someone on a 30-year loan now servicing a Commonwealth Bank loan with a 5.17 per cent variable rate.
Little more nine months ago, this borrower was paying a 2.29 per cent variable rate when the RBA cash rate was still at a record-low of 0.1 per cent.
But three more rate rises would take a Commonwealth Bank standard variable rate to 5.92 per cent and see repayments climb to by another $283 to $3,567 – marking a 54.7 per cent increase in a year.
NAB chief economist Alan Oster last week suggested a 4.1 per cent cash rate, as he is predicting, would go close to pushing Australia into a recession, which would be the first sparked by rate rises since 1991.
‘We still don’t expect a technical recession in Australia – but with rates rising above 4 per cent, it is becoming more of a possibility,’ he said.
AMP chief economist Shane Oliver has said a 4.1 per cent cash rate would cause a recession, defined as two consecutive quarters of economic contraction.
‘I do think a 4 per cent plus cash rate would probably knock the economy into recession or come very close to it,’ he told Daily Mail Australia.
Inflation last year soared by 7.8 per cent, the most severe increase since 1990 that is also well beyond the RBA’s 2 to 3 per cent target.
