Big four banks divided on the cash rate outlook
Westpac has revised its cash rate forecasts, moving its projected Reserve Bank of Australia (RBA) rate hikes from June and August to August and September.
The bank's economics team cited the ongoing Middle East conflict as a reason for caution, noting that "it will take some time before the need for the additional hikes becomes apparent in the data."
"The RBA hiked the cash rate this month, and while it seeks some breathing space, we expect further hikes later, in August and September," Westpac's economists said.
The revision puts Westpac at odds with NAB, which continues to expect a rate rise at the RBA's next meeting in June, followed by a prolonged hold. Commonwealth Bank and ANZ both forecast the cash rate to remain unchanged for the rest of the year, though each acknowledges the risk of a further increase in August should inflation warrant it.
| Current big four bank cash rate forecasts | ||
| Forecast | Cash rate at end of 2026 | |
|---|---|---|
| CBA | No change | 4.35% |
| Westpac | 2 x 0.25 hikes, Aug + Sept | 4.85% |
| NAB | 1 x 0.25 hike, June | 4.60% |
| ANZ | No change | 4.35% |
"Westpac's updated cash rate forecast isn't likely to give borrowers more hope but, if it's on the money, will give borrowers more time to prepare," said Sally Tindall (pictured right), data insights director at Canstar.com.au.
"The bank's economic team now expects the RBA to hold fire at its next meeting in June, giving it time to get greater clarity around how long the war in the Middle East will continue. The worrying part of this debate is how little breathing room some borrowers have left."
With around 13% of big four bank customers carrying no repayment buffer, Tindall pointed out that even one additional rate rise could be enough to send some households into deficit.
"If you don't have a decent buffer in your mortgage, now is the time to see where you might be able to inject one in," she said. "While so many households have cut back to the absolute minimum, extreme steps such as taking on extra work might be what you need to do to get through what is set to be an incredibly tough financial time for many borrowers."
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