Westpac expects three more rate hikes and a Reserve Bank policy rate of 4.1 percent by May

Westpac is the latest of the big four banks to now expect three more rate hikes by May.

Chief Economist Bill Evans has revised Westpac’s forecasts for the Reserve Bank to hike interest rates to an 11-year high of 4.1 percent in March, April and May.

“At 4.1 percent, the policy rate will be in a highly contractionary zone and a pause would be appropriate,” he said.

Three of Australia’s big four banks – Westpac, ANZ and NAB – are now expecting interest rates to be 4.1 per cent by May, while the Commonwealth Bank still expects interest rates to be 3.85 per cent by May.

Westpac is the latest of the big four banks to now expect three more rate hikes by May

Borrowers have already suffered nine straight monthly rate hikes since May 2022, taking the RBA cash rate to a 10-year high of 3.35 percent.

This has resulted in a 42 percent increase in repayments from an average of $600,000 to $3,284, versus $2,306 for someone on a 30-year loan, who is now servicing a Commonwealth Bank loan at 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 at a record low of 0.1 percent.

But three more rate hikes would take a standard Commonwealth Bank floating rate to 5.92 percent and increase repayments by another $283 to $3,567 — a 54.7 percent increase in one year.

NAB chief economist Alan Oster suggested last week that a cash rate of 4.1 percent, as he forecasts, would nearly push Australia into a recession, which would be the first by rate hikes since 1991.

“We still don’t expect a technical recession in Australia – but with interest rates going above 4% it’s becoming more likely,” he said.

AMP chief economist Shane Oliver has said a policy rate of 4.1 percent would cause a recession, defined as two consecutive quarters of economic contraction.

“I think an interest rate of 4 per cent plus cash would probably push the economy into recession or very close to it,” he told Daily Mail Australia.

Inflation rose 7.8 percent last year, the sharpest rise since 1990, which is also well above the RBA’s target of 2 to 3 percent.

Source: | This article originally belongs to Dailymail.co.uk