Westpac Forecasts RBA Rate Hike Before Year End
Westpac predicts a 25 basis point increase in the official cash rate by November, joining other major banks in shifting their outlook.
Westpac now expects the Reserve Bank of Australia to raise interest rates this year. The bank predicts a 25 basis point increase will occur by November. This marks a shift from previous forecasts that suggested rates would stay on hold.
Luci Ellis, Westpac Chief Economist, cites resilient household spending as the primary driver. She also points to an unexpected economic boost from the data centre sector. These factors outweigh the recent decline in consumer sentiment.
Major banks align on November hike
Westpac joins Commonwealth Bank Australia and ANZ in this prediction. All three institutions expect a rate rise in November. National Australia Bank anticipates the increase could happen at the next meeting in late September.
Inflation running above the central bank target remains a key factor. The next official consumer price data will release after the September board meeting. This data will likely confirm the trajectory for monetary policy.
Borrower costs rise with new rates
A 25 basis point hike increases monthly repayments for standard loans. Canstar calculates this adds $91 to the monthly payment on a $600,000 loan. This represents the fourth hike of the year.
The total annual increase for such a loan reaches $363. Borrowers face higher costs while property values decline. This dual pressure intensifies the financial strain on households.
Property values drop in June quarter
Australian residential property values fell by $34 billion in the June quarter. This is the first decline in four years. The drop follows a 30 percent surge since September 2022.
Westpac economist Matt Hassan notes this impacts household wealth. Price declines have outpaced new housing supply since February. The number of dwellings rose by 54,400 in the quarter. The decline in value reflects a broader market turnaround.
