Category: Home Loan News

The financial landscape is constantly changing in Australia. Thus, the Reserve Bank of Australia (RBA) has been actively adjusting the cash rate throughout the year. Particularly, it all began on May 3, 2022, when the RBA decided to increase the cash rate from its historically low level of 0.10% per annum to 0.35% per annum — it was their first rate hike since November 2010.

Since that pivotal decision, the RBA has made a series of rate hikes. Namely, four instances of 0.50% increments and seven instances of 0.25% increments, summing up to a total of 11 cash rate increases. Eventually, the cash rate has risen to its present level of 4.10%.

As we approach the end of year 2023, everyone will wonder whether the RBA will hike interest rates in November or remain the same as now. Worry no more! This guide may specify your concerns and uncertainties regarding RBI interest rate predictions for November. Let’s scroll down to learn more.

Will the RBA Hike Interest rates in November?

Most experts and analysts, unfortunately, anticipate that RBA will increase interest rates from 4.10% per annum to 4.35% per annum in November. Several reasons fuel this RBA cash rate prediction, which is also RBI interest rate prediction. I.e., the RBA cash rate typically influences the interest rates banks charge their customers for loans and deposits. Let’s take a look at a list of key factors that influence these unfavourable RBI interest rate predictions 2023 Australia

Inflation Concerns

The country’s current inflation rate still remains significantly above the RBA's target range of 2-3%. This can prompt the RBA to raise interest rates in November, as they can optimise a favourable inflation rate.

Economic Growth

The Australian economy is recovering from the COVID-19 pandemic, with strong growth in production, exports, and investment. This can boost the confidence of the RBA to raise interest rates.

Housing Market

The rising property prices can also contribute to these displeasing interest rate predictions for 2023 Australia. This is because the RBA may consider that raising interest rates would be a potential strategy for both mitigating inflation and addressing the concern of rapidly increasing property prices.

Low Unemployment Rates

The unemployment rate in Australia decreased to as low as 3.6%, which is more than expected and below the market standard. Besides, the participation rate (a metric that shows the percentage of the population actively seeking employment) also declined to 66.7% from the previous month’s 67%. The improved employment situation among Australians may potentially lead to an interest rate hike in November.

Global Economic

The current exchange rate of the Australian dollar is significantly low against the US dollar. This factor may reduce the need for the RBA to maintain low interest rates to support the exchange rate and external competitiveness. It could also be a contributing factor in unfavourable RBA cash rate predictions.

Commonwealth Bank, Westpac, NAB, and ANZ Rate Predictions for November 2023

Let’s take a look at the November interest rate predictions for 2023 Australia, according to the top four banks in Australia:

Bank	Cash rate peak
CBA	4.35%
Westpac	4.35%
NAB	4.35%
ANZ	4.35%

When Will Interest Rates Come Down?

Among these four big banks, Westpac and NAB have presented their outlooks regarding the future RBA cash rate prediction. Namely, NAB anticipates at least one more 0.25% rate hike, whereas Westpac foresees interest rates holding steady until the following year. Nevertheless, both banks share the prediction that interest rates will see a decline by September of the subsequent year.

Bank	Dec 2023	Mar 2024	Jun 2024	Sept 2024	Dec 2024	March 2025
Westpac	4.10%	4.10%	4.10%	3.85%	3.60%	3.35%
NAB	4.35%	4.35%	4.35%	3.85%	3.35%	3.10%

What Does an Interest Rate Pause Mean for Home Loans?

An interest rate pause for home loans refers to the Reserve Bank of Australia (RBA) deciding to keep interest rates unchanged at a particular time. Namely, during this period, RBI impedes itself from raising or lowering the official cash rate, making it significant implications for home loan borrowers. Here are certain key benefits that home loan borrowers can expect due to implementing the Interest Rate Pause.

• Lower Monthly Repayment: An interest rate pause means no more interest hikes — at least, as long as the RBA keep pausing the interest rate. This can help them save some money and ease their financial burden.
• More Certainty and Confidence: The interest rate pause may also provide some certainty and confidence to borrowers worried about the dynamic nature of interest rates and the impact on their budgets.
• Optimised Market Condition: Borrowers can have more flexibility and choice in their home loan options, as the pause may create more competition and innovation among lenders. This can help them to find the best deal that suits their needs and preferences and also to negotiate better terms and conditions.

When the Reserve Bank of Australia surges the cash rate, banks and financial institutions follow the hiked rate instantly. As a result, they increase the interest rate charged on the variable rate mortgages. 

After holding the cash rate at a record low for almost a year, the RBA hiked it in May 2022. The upsurge in the cash rate is an attempt to drive the economy through the pandemic effects and to tackle rising inflation. 

Since then, citizens are witnessing a hike in rate every month, with mortgage providers passing it on in full. As a result, the current interest rates in Australia towards mortgages have become more expensive contrary to the one recorded at the beginning of 2022.  

The cash rate forecast is unclear as inflation is still on the move. Considering the ongoing trends, senior economists have predicted how much the interest rate will go up in 2022 and the forecast for the next five years in Australia. 

Joining the forecast trends, the Big Four Banks of Australia warned citizens that in 2023 the cash rate might go as high as 3.85%. So, if you have secured a mortgage or are planning to get one, you must know what effect a cash rate hike of this significant amount can have on variable-rate mortgages.

What is the RBA Cash Rate?

The RBA cash rate is the official interest rate of Australia that has lately shown an escalation to 2.85% (September 2022). The Reserve Bank of Australia influences the cash rate with a parameter of 0.25%. Either there will be an increase or decrease in the cash rate by 0.25 points. 

Furthermore, the cash rate demonstrates the interest rate levied on unsecured 'overnight' funds. You can consider it a benchmark to drive mortgage interest rates, saving accounts rates to exchange rates. 

Every month (excluding January), the Reserve Bank of Australia organises a board meeting in which the cash rate is decided. Whenever there is any change in the RBA cash rate, people witness a notable knock-on impact on the financial products' price and the economy. 

Historically, a hiked cash rate has always increased interest rates on mortgages, automobile loans, personal loans and other financial products. At the same time, decreased cash rate results in a downfall in interest rates on financial products. 

The current cash rate in Australia is 2.85%.

How High Will Interest Rates Rise?

Considering the hiked cash rate, the only question is how high the interest rates will rise. Lately, the RBA raised the cash rate by 25bps making it clock at 2.85%. This surge perfectly matched the forecasts made by the economists. It was the seventh rate hike straight in a row since May 2022. The borrowing costs have crossed a bar that has not been witnessed since April 2013. 

Adding to this, the board mentioned that the rates would go further high as inflation is too high in Australia, peaking at around 8%. The forecasts reveal that in 2023, the inflation rate will settle down somewhere around 4.57%. In 2024, it will show a significant relief by playing a little above 3%. Additionally, the board reiterated that they would make every possible move to achieve the predicted inflation rate. Adhering to this, the RBA also raised the Exchange Settlement balances interest rate by 25bps making it clock at 2.75%. 

Answering "how much will interest rates go up in 2022", it can go up to 3.25%. In the long run, the interest rate in 2022 is forecasted to trend around 3.85%. There will be a downfall in 2024 as the projected rate is 3.15%. 

What is the Cash Rate Forecast from the Big Four Banks?

The Big Four Banks gave words on the hike in the cash rate, making a cash rate forecast for the upcoming year. Here's what they have to say about the projected rates for the next few months.

Bank Name	Short-Term Cash Rate Forecast	Long-Term Cash Rate Forecast
CBA	3.10% (December 2022)	2.60% (November 2023)
Westpac	3.85% (March 2023)	2.60% (2024)
NAB	3.60% (March 2023)	Will Remain Steady in 2024
ANZ	3.85% (May 2023)	3.35% (Last Quarter of 2024)

 

ANZ (Australia and New Zealand Banking Group): David Plank (Senior Economist) predicted the cash rate saying the rate will further soar to a high of 3.85%. If RBA continues raising the cash rate on a 0.25 basis till May 2023, the cash rate will reach the predicted benchmark.  

CommBank: Gareth Aird, an economist at CommBank, made a forecast on how much cash rates will go up in 2022. As per his projected cash rate, by December 2022, the cash rate will peak by 3.10%. Gareth Aird added that this point would pause a cash rate hike. 

NAB (National Australia Bank): Alan Oster said by the end of the first quarter of 2023, the cash rate will surge to 3.60%. Per the predictions, post-March 2023, the RBA cash rate will stay stable and again fall by March 2024. 

Westpac: Bill Evans (chief economist at Westpac) estimated that rooted in strong inflation, the cash rate will rise to an all-time high of 3.85% by 2023. Furthermore, there will be a cash rate cut by 2024.

Big Four Banks’ Interest Rate Forecast

You can't escape the fact that as soon as the cash rate rises, so does the interest rate. Considering this, the big four banks have given predictions on the interest rate difference citizens will witness in upcoming months. 

Starting Month	Average Interest Rates Contingent on CBA Forecast	Average Interest Rates Contingent on Westpac Forecast	Average Interest Rates Contingent on NAB Forecast	Average Interest Rates Contingent on ANZ Forecast
April 2022	2.86%	2.86%	2.86%	2.86%
May 2022	3.11%	3.11%	3.11%	3.11%
June 2022	3.61%	3.61%	3.61%	3.61%
July 2022	4.11%	4.11%	4.11%	4.11%
August 2022	4.61%	4.61%	4.61%	4.61%
September 2022	5.11%	5.11%	5.11%	5.11%
October 2022	5.36%	5.36%	5.36%	5.36%
November 2022	5.61%	5.86%	5.61 %	5.61 %
December 2022	5.86%	6.11%	5.86%	5.86%
February 2023	Not Available	6.36%	6.11%	6.11%
March 2023	Not Available	6.61%	6.36%	6.36%
May 2023	Not Available	Not Available	Not Available	6.61%
August 2023	5.61%	Not Available	Not Available	Not Available
November 2023	5.36%	Not Available	Not Available	Not Available
February 2024	Not Available	6.11%	Not Available	Not Available
May 2024	Not Available	5.86%	Not Available	Not Available
August 2024	Not Available	5.61%	Not Available	6.36%
November 2024	Not Available	5.36%	Not Available	6.11%
Cash Rate Peak	3.10%	3.85%	3.60%	3.85%

The current interest rate in Australia stands at 5.73%, and the expected interest will go up to 6.73%% as per Australia's big four banks. 

How Would a Cash Rate Hike to 3.35% Affect Your Mortgage?

While setting the offered interest rate to the borrowers, lenders consider several factors, and one major factor is the cash rate. Any rise or cut in the cash rate impacts the variable interest rates. 

The mortgage interest rates are directly tied to the RBA cash rate; thus, the interest rates on the existing mortgages rise too. Lenders can amend the interest rate even when there is no update in the cash rates. Such 'out of cycle' mortgage rate changes can happen anytime.

When the board increases the cash rates, the banks and financial institutions pass on the hiked rates in full to the borrowers resulting in increased mortgage repayments. Since 2010, the citizens have not witnessed any increase in the rate. But, the fast-driving inflation has somewhat increased the cash rate, and the borrowers need to prepare well as the rates are already escalating. Furthermore, the rates will keep increasing, surpassing the predicted rates of around 3%. 

The major concern of the borrowers is that the mortgage interest rates have been the lowest in the past two years. Borrowers who have secured mortgages within the last two years at variable interest rates will have to pay huge repayments due to the hiked cash rate. 

The current interest rate in Australia is 5.73%, but as soon as the cash rate rises, so will the interest rate. The predictions reveal that, on average, the variable interest rate will go as high as 6.73%. 

What could this Percentage mean for the variable rate mortgage? To make it easy, we have crunched values to determine how much repayments will rise if the interest rate reaches the predicted level, i.e. 6.73%. 

Mortgage Amount	Monthly repayments with an average variable mortgage rate of 5.73%	Monthly repayments: with a projected average variable mortgage rate of 6.73%	Increase in repayments (on a monthly basis)
$500,000	$2,912	$3,236	$324
$750,000	$4,367	$4,855	$488
$1,000,000	$5,823	$6,473	$650

This is how the cash rate hike will affect your mortgage repayments. Borrowers need to plan and manage their finances in an informed way to skip default payments. 

After cutting the cash rate for almost a decade, the Reserve Bank Australia has raised the cash rate for the seventh month in a row. The board and the big four banks also forecast the escalation for the next two years. Strong inflation and increased cash and interest rates have left citizens wondering. The question is how high will the interest rate go. The analysis reveals it will surge for the next few months, then a pause in the second half of 2023. Citizens will witness a downfall in 2024.