Australian Banks Revise Forecasts for Another Rate Hike

Major Australian banks have revised their forecasts to include another interest rate hike before the end of the year, following a hotter-than-expected inflation reading. The Reserve Bank of Australia left the cash rate unchanged at 4.35% in its last meeting, but a 3.5% CPI result has put pressure on further increases.

The Commonwealth Bank of Australia (CBA), National Australia Bank (NAB), and Australia New Zealand Banking Group (ANZ) have all revised their forecasts from an extended hold to a 25-basis-point hike to 4.6%. Westpac is the only major sticking to its call of no more hikes in 2023.

Brokers warn that first home buyers will take the brunt of another rate rise, with reduced borrowing capacity and fewer options for some clients. Aimee Bergan, founder of APC Home Loans, said a further 0.25 percentage point increase would mean 'reduced borrowing capacity and fewer options for some clients', particularly those already close to their maximum capacity.

While some brokers believe the impact wouldn't be one-way, with softer property prices and reduced competition in some markets, others say buyer confidence could be a casualty of another rate hike. Bergan said uncertainty alone could keep potential buyers on the sidelines, while Naamat Chaaban noted that the biggest impact would likely be on confidence and transaction volumes rather than prices.