Borrowers could be in for a tough few years, canstar.com.au data director Sally Tindall said.
Australia is facing the highest rate of cash since the Global Financial Crisis as one of the major banks predicts aggressive RBA action that could devastate homeowners.
Westpac this week increased its annual cash rate forecast, suggesting the RBA will deliver another three rate hikes in 2026, adding hundreds of dollars to mortgage payments.
The bank now expects the RBA to raise interest rates by 0.25% in May, June and August, making it five increases in as many meetings.
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Australia is likely to face its highest level of liquidity since the Global Financial Crisis. Photo: NewsWire / John Appleyard
This will raise the cash rate to 4.85% – a level not seen since November 2008, when the cash rate fell due to the Global Financial Crisis (GFC).
Westpac said prolonged fuel supply disruptions, faster-than-expected outturns in goods and services and the RBA’s restrictive policy environment would push interest rates up to 4.85% in August, despite a temporary cut in fuel duty.
Analysis by Canstar.com.au shows that if the rate increased by 0.25 per cent in May, June and August, monthly payments on a $600,000 loan with a 25-year term would increase by about $276.
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Westpac has proposed another three rate hikes this year.
Including two increases already this year, total monthly payments could increase by $457 in August.
If the hike plays out as Westpac expects, someone with a $600,000 loan at the start of the hike, will end up paying an extra $3,280 in monthly payments in 2026, compared to if there had been no increase this year.
For a $1m loan, that could be more than $5,466 a year in monthly payments and additional interest charges.
Borrowers may be in for a tough few years. Photo: NewsWire / John Appleyard
“Borrowers could be in trouble for a few years if Westpac’s forecast for another three hikes and no rate cuts until 2028,” canstar.com.au data director Sally Tindall said.
“While other major banks have said they are climbing mountains, Westpac is now predicting an aggressive approach, which will take liquidity to levels not seen since the collapse of the GFC.
“The result of the increase in fuel costs has started to increase prices in other areas, the RBA may feel that it should stand up because when prices go up they don’t usually go down.
“The government may have tried to ease the pressure by halving the fuel tax, but, if the RBA then raises interest rates, it could turn into luxury money being transferred from the bowser to the banks.
Westpac is predicting cash levels to reach levels not seen since the GFC collapse.
“For borrowers, know that this is only a forecast, not a done deal, but use it as a warning to get your money, especially your loan, in the best possible shape.”
“Even if you’re not ready to change lenders, it’s a good idea to talk to your bank.
“In a competitive market, honesty doesn’t pay – but a simple phone call asking for a sharp price might.”
