Will the RBA hike the cash rate in October 2022? Westpac, CBA, ANZ, and NAB home loan predictions

With four months of 0.50% hikes behind us, many home loan borrowers dread another hefty rise in October. Previously, the Big Banks predicted a more temperate path for interest rates over summer of 0.25% apiece, but new forecasts suggest the heat is on.

Inflation has exceeded all expectations in 2022. The Reserve Bank of Australia (RBA) pegs a peak of 7.75% in Q4, well above its target band of 2% - 3%. Predictions from Commonwealth Bank (7.25%) and NAB (7.5%) skew a little under, but still suggest the problem is nowhere near under control.

As such, the RBA is expected to push the official cash rate into ‘contractionary’ territory by lifting it beyond 2.60%. Currently, the cash rate sits at 2.35%, and the RBA hasn’t yet indicated what the final cash rate will be. 

So either way you slice it, the Big Banks expect the RBA to move next month, whether it’s a standard 25 basis point hike or a supersized 50 bp one. 

Dovish forecasts from CommBank and NAB place the final cash rate at 2.85% around November/December 2022. However, CommBank concedes there’s a risk of the RBA making another quarter-percentage movement for a final rate of 3.10% in 2023.

However, Westpac and ANZ fall into more hawkish territory. ANZ predicts the cash rate will peak at 3.35% in November 2022, while Westpac argues for 3.60% in February 2023. (The RBA doesn’t meet in January, so at least your post-Christmas budget will have a bit of a break). 

Both eye-watering projections require a 0.50% jump in October, with more to follow, pulling up Australia’s floating rates like a rising tide. 

Westpac, the bank forecasting the steepest rise, also announced 0.50% increases today to all its fixed-term offers, so regardless of where the hikes fall, the bank has priced its loan products as if the worst is to come.

The RBA made aggressive moves to the cash rate to squeeze inflation, but they’ve mostly squeezed borrowers instead. Falling house prices indicate a more buyer-hesitant property market, while complaints about the rising cost of living mean household belts have tightened. 

Yet there’s also evidence we’re only just now seeing the effects of earlier RBA decisions, like a shock wave reaching us moments after the initial boom. Another 0.50% hike in October would add to the cumulative impact headed our way. If the RBA isn’t careful, economists warn there’s a real risk of overdoing it and plunging Australia into a recession. 

The tension stretches with every move, so it’s essential to safeguard your finances and prepare for the rest of 2022’s rate hikes. 

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