Yahoo Finance Westpac’s grim interest rate warning for mortgage holders: ‘Higher bar’
Westpac has joined ANZ and NAB in pushing back its interest rate cut prediction to 2025.
Westpac is the latest major bank to push back its interest rate cut prediction. The Reserve Bank of Australia (RBA) kept the cash rate at a 12-year high of 4.35 per cent this week, leaving some homeowners struggling to keep up.
Westpac now thinks relief could be another six months away. The country’s second-biggest home loan lender has predicted the RBA will deliver a rate cut in February 2025 and will make fewer cuts than previously expected.
“The RBA Governor all but ruled out cutting rates this year. This runs counter to our earlier thinking, that the process of reducing the restrictive stance of policy could start from November,” Westpac chief economist Luci Ellis said.
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“We have now revised our view to an expectation that the RBA will first start cutting rates at the February 2025 meeting.
“Consistent with our earlier forecast, the trajectory of rate cuts is expected to be tentative and conservative, at one 25 basis point cut per quarter.”
Westpac believes the cash rate will be cut four times to 3.35 per cent, higher than the 3.10 per cent end-point previously forecast.
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Ellis, who was previously an assistant governor at the RBA, said the bank’s forecasts for underlying inflation were the same as the RBA’s. The central bank is expecting inflation to return to the 2 to 3 per cent target in late 2025 and approach the midpoint in 2026.
However, she said Westpac was “more pessimistic” about consumption growth and less concerned over productivity.
Ellis said it will “take more” and a “higher bar” of accumulated evidence for the RBA to move. But by February, she said the board would have two more quarterly inflation readings, plus new national accounts data to take into consideration.
RBA governor Michele Bullock has ruled out a “near-term” cut in interest rate in the next six months. She has also said the board “will not hesitate” to hike interest rates if it is needed to avoid persistently high inflation, which she warned “hurts everyone”.
If the RBA hiked again, RateCity calculated this would add $89 per month to repayments on a $600,000 loan.
Borrowers are already paying about $1,562 per month more on a $600,000 loan since the RBA started hiking rates in May 2022.
CBA only major bank predicting 2024 rate cut
Commonwealth Bank (CBA) is now the only Big Four bank still predicting an interest rate cut in 2024, forecasting a November cut. It expects there will be five cuts in total, taking the cash rate to 3.10 per cent.
NAB expects the RBA will cut rates in May 2025, with a total of five cuts by June 2026 to take the cash rate to 3.10 per cent.
ANZ, like Westpac, is forecasting a February 2025 rate cut, followed by another cut in April and then the fourth quarter. This would leave interest rates at 3.60 per cent at the end of 2025.
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