Will the RBA hike the cash rate in October 2023? CBA, ANZ, NAB, and Westpac home loan predictions

Kid jumping between blocks like the RBA jumping between interest rate decisions

It’s been three months since the Reserve Bank of Australia (RBA) last raised interest rates. Its last decision brought the official cash rate to 4.10% – a decade high. 

At the moment, the central bank is warily monitoring the Australian economy as inflation slows down. The goal is to achieve a ‘soft landing’, i.e. kill inflation without causing a recession

But while inflation is moderating, sluggish growth in the economy has worried many economists. Recent data indicates Australia is in a per capita recession, which means that economic output divided by Australia’s population has lagged for two quarters in a row.

Experts call it the ‘slow down we had to have’ to cool the overheated economy, though many households might find this hard to hear.

Signs of economic distress will be on the RBA’s mind as it heads into its 3 October monetary policy decision – the first to come from new RBA governor Michele Bullock. Will the new leadership prove hawkish or dovish on interest rates? All eyes will be on her.

As it stands, the odds suggest we’ve already reached the cash rate peak. But with more tightening expected to flow through to the economy and home loans, there’s a potential that the RBA’s previous hikes have already overdone it.

So will the RBA hike the cash rate in October? Almost definitely not. But is the interest rate cycle over? Let’s look into the forecasts from the Big Four banks.

Will the RBA hike interest rates in October?

Collage of man thinking about the RBA hiking interest rates in October.

The latest Monthly Consumer Price Index puts annual inflation to August at 5.2%, up from 4.9% in July. This is still well above the RBA’s desired target band of 2% - 3%, so interest rates will need to stay high until they crush inflation. 

Rising insurance premiums, fuel prices, and housing costs have primarily driven the lift from July, but these items are more volatile than the usual basket making up core inflation. So while a minor bounce isn’t great, it’s still overall good news: the deeply restrictive cash rate is working. Therefore, it’s likely the RBA will not hike interest rates in October. 

“I think the RBA will hold in October,” says Mozo rate expert Peter Marshall.

“It will wait to see what happens with another month’s worth of inflation figures and unemployment rates. I don’t think that it’ll be looking to rush another change through. 

“It still has November and December left this year if the RBA board wants to hit us with another rate hike. So there’s time left. But I don’t think it’ll be wanting to make a swift decision right now.”

Commonwealth Bank, Westpac, NAB, and ANZ rate predictions for October 2023

At the time of writing, all Big Four Banks agree the RBA will hold the cash rate steady at 4.10% in October. November is a little less certain, but for now, home loan borrowers can rest easy.

Commonwealth Bank, ANZ, and Westpac believe the cash rate is high enough to achieve its goals, so it will stay at 4.10% until interest rates come down. This means we’re at the peak of this cycle.

NAB is the one outlier. The big bank reckons we still have one more rate hike left for this cycle – a 0.25% jump by November or December 2023. This would put the official cash rate at 4.35% until it unwinds in September 2024.

Big Four Bank cash rate predictions – October 2023

Cash rate peak
ANZ
4.10%
CBA
4.10%
Westpac
4.10%
NAB
4.35%

November looks like a prime target for the experts who believe another rate hike is coming because it settles between the sweet spot of opportunity and damage control. 

“November allows a bit more time for the impacts of the string of rate rises over the last year to flow through. If they hike in December, people will cry foul and say you’re ruining Christmas, and a December rate hike could have a larger than expected impact,” explains Marshall.

“If they hike in November, they can put words around that and the chaos can settle by the time people are doing their Christmas shopping, without businesses screaming about how much damage the RBA has done to them.”

Loan details

Rate change

Repayment change if rates go up

Is Australia going to fall into a recession?

Collage of a woman staring off the edge into the abyss of a recession.

High interest rates put pressure on households and businesses, so it’s no wonder that many fear the central bank overdoing it and causing a recession. Some economists think the RBA has hiked too much, given how quickly inflation is falling, while others think the cash rate isn’t high enough to drive inflation down.

However, given that inflation is slowing, commodity prices remain high, and employment is tight, the Australian economy looks on track to avoid a technical recession.

This doesn’t mean cost of living pressures aren’t giving Australians pain. Indeed, even if a recession is avoided and interest rates are at their peak, we might be in a per-capita recession. This means that while the economy is still in the green, for everyday Aussies, it still ‘feels’ like we’re in a recession. 

The challenge for the RBA will be to cut interest rates at the right time as inflation falls. Cut too soon, and inflation could shoot back up. On the other hand, leaving interest rates too high for too long could lead to a recession because the pressure gets too much for household budgets. 

This is part of the balancing act the incoming governor Michele Bullock must play in her first year in the top job.

When will interest rates come down?

Two of the Big Four banks, Westpac and NAB, have each laid out predictions for when interest rates may come down. 

NAB believes there will be at least one more 0.25% rise, while Westpac sees interest rates remaining steady until next year. Both banks are, however, predicting that interest rates will fall by September of next year.

Bank
March 2024
September 2024
March 2025
Westpac
4.10%
3.85%
3.35%
NAB
4.35%
3.85%
3.10%

In the short term, NAB's projection could mean that mortgagors have to contend with another cash rate hike and, in turn, higher repayments. However, if these predictions also hold true in the long term, borrowers could see the interest rate on their loans falling in less than a year.

Fixed-rate home loans getting better as the cuts roll in

Collage of woman celebrating fixed rate home loan cuts.

Since official interest rates have remained steady for the past few months, lenders have revised their rate expectations and started cutting fixed rate home loans. As the path ahead becomes more clear in the economy — and the date more certain when interest rates fall — fixed rate home loans could start to see some particularly advantageous rates in comparison to variable rates.

However, with the RBA possibly moving in either direction, borrowers should keep in mind that there are some tools to help manage interest rate hikes or take advantage of cuts to rates:

  • Refinancing: For mortgagors locked into a higher interest rate, refinancing could save a significant amount over the life of the loan. However, be mindful of any exit fees or charges that may apply.
  • Offset Accounts: one other way of counterbalancing high-interest rates is with an offset account. By depositing cash into an account linked to a loan, borrowers can reduce the amount of interest they’ll need to pay.
  • Fixed rates: With fixed rates expected to drop even more in the coming months, locking in a low fixed rate could be advantageous. Fixed rates offer the benefit of predictable monthly payments, providing financial stability.
  • Variable rates: On the flip side, a variable rate loan could allow borrowers to capitalise on further rate cuts immediately as they happen. They can also use interest-saving features like offset accounts and free extra repayments. However, there is also the risk of variable rates rising further in the future – and lenders aren’t obligated to pass along rate cuts to customers. 

Fixed rates offer stability but less flexibility, while variable rates offer more flexibility but come with less certainty. Mortgagors should assess their financial situation, as it could inform which loan is right for the appropriate situation. 

In the meantime, the path towards a soft landing for the RBA – and Australia – remains narrow. Home loan borrowers can brace more for more of the same until the economy does something wildly different. 

Compare home loans below. For award-winning picks from 2023, check out our best home loans hub.

Home loan comparisons on Mozo

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Last updated 25 June 2024 Important disclosures and comparison rate warning*
  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
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    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Unloan Variable

    • Owner Occupier
    • LVR <80%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    5.90 % p.a.
    Initial monthly repayment
    $2,995
    Go to site

    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

  • Discount Variable Home Loan

    • Owner Occupier
    • LVR<70%
    Interest rate
    5.99 % p.a.
    Variable
    Comparison rate
    6.01 % p.a.
    Initial monthly repayment
    $2,995
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    A low rate home loan for owner-occupiers packed with great features including unlimited extra repayments, free online redraw, no application or monthly admin fees. Rate will vary depending on LVR. Winner of a Mozo Experts Choice 2024 Low Cost Home Loan Award^

  • Variable Home Loan 90

    • Principal and Interest
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    6.04 % p.a.
    Variable
    Comparison rate
    6.06 % p.a.
    Initial monthly repayment
    $3,011
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    Affordable home loan rate for buyers or refinancers. No monthly or ongoing fees. Option to add an offset for 0.10%. Access to savings with unlimited redraws available. Minimum 10% deposit required.

  • Fixed Rate Loan

    • Owner Occupier
    • Principal & Interest
    • LVR <80%
    Interest rate
    6.09 % p.a.
    Fixed 3 years
    Comparison rate
    6.15 % p.a.
    Initial monthly repayment
    $3,027

    Additional repayments of up to $10K per fixed year. Interest rate discounts available. Waiver of $499 application fee when combined with an Orange Advantage Home Loan.

  • The Better Home Loan Special Offer

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    6.14 % p.a.
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    Comparison rate
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    Initial monthly repayment
    $3,043
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    Enjoy a variable rate home loan with a bunch of features from Police Credit Union. Make extra repayments at any time without penalty. No monthly, annual or upfront fees. Free online redraw. Minimum 20% deposit. Qualifying criteria applies. Minimum loan amount is 200K. For new customers only. Mozo Experts Choice Home Lender Credit Union of the Year 2023.

  • Basic Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.16 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

  • Mortgage Simplifier

    • LVR<80%
    • Owner Occupier
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.17 % p.a.
    Initial monthly repayment
    $3,043

    Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.

  • Offset Home Loan

    • Owner Occupier
    • LVR<60%
    • Principal & Interest
    Interest rate
    6.14 % p.a.
    Variable
    Comparison rate
    6.39 % p.a.
    Initial monthly repayment
    $3,043
    Go to site

    Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.

  • Discount Great Rate Home Loan

    • Owner Occupier
    • Principal & Interest
    • LVR<80%
    • over $150k
    Interest rate
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    Variable
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    Initial monthly repayment
    $3,059
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    An easy to use Home Loan with no establishment fee and no monthly or annual fees. Minimum deposit of 20% is required. Mozo Experts Choice Awards - Investor Home Loan Award 2024^.

  • Basic Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR<70%
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    Comparison rate
    6.20 % p.a.
    Initial monthly repayment
    $3,079
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    No upfront or ongoing fees. Free extra repayments and redraw facility. Option to earn Qantas points. Min 30% deposit required. Borrow up to $750,000.

  • Offset Home Loan

    • Fixed
    • Owner Occupier
    • Principal & Interest
    • LVR <70%
    Interest rate
    6.25 % p.a.
    Fixed 3 years
    Comparison rate
    6.42 % p.a.
    Initial monthly repayment
    $3,079
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  • Fixed Rate

    • Owner Occupier
    • Principal & Interest
    • <80% LVR
    Interest rate
    6.59 % p.a.
    Fixed 3 years
    Comparison rate
    7.06 % p.a.
    Initial monthly repayment
    $3,190

    Enjoy up to $3000 cashback for eligible first home buyers and $2000 cashback for refinancers on eligible home loans with the ANZ Fixed Rate Home Loan. Get the security of repayment certainty with a competitive locked in rate. No ongoing fees to pay. Offset account on 1-year fixed loans ($10/month fee applies). Interest-only payments allowed.

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

^See information about the Mozo Experts Choice Home Loan Awards

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