Westpac predicts the Reserve Bank will NOT hike interest rates for the 11th time in a row next month

Westpac is now expecting the Reserve Bank of Australia will pause a planned April rate hike as it worries about financial market turmoil.

Chief economist Bill Evans has updated the bank’s forecasts to have the RBA cash rate peaking at 3.85 per cent in May, instead of 4.1 per cent as previously predicted.

That would mean one more rate hike instead of two to the existing 11-year high 3.6 per cent cash rate, following the tenth consecutive increase in March.  

‘The major change since the March RBA Board meeting has been the adverse developments in global markets,’ Mr Evans said.

Credit Suisse shares plunged by 24 per cent on the Swiss Exchange during Wednesday’s trade after the Saudi National Bank refused to up its 9.88 per cent stake in the Swiss bank.

This stirred fears of a financial crisis until the Swiss central bank agreed to lent it $A81billion. 

Westpac is now expecting the Reserve Bank of Australia to pause a planned April rate hike as it worries about financial market turmoil. Chief economist Bill Evans has updated its forecasts to have the RBA cash rate peaking at 3.85 per cent in May, instead of 4.1 per cent as previously predicted

What Australia’s banks are now forecasting

WESTPAC: Rate pause in April and a 0.25 percentage point increase in May taking the Reserve Bank cash rate to 3.85 per cent

ANZ: Rate rises of 0.25 percentage points in both April and May, taking the cash rate to 4.1 per cent

COMMONWEALTH BANK: Rate rise of 0.25 percentage points in April, taking cash rate to 3.85 per cent 

NATIONAL AUSTRALIA BANK: Rate rises of 0.25 percentage points in both April and May, taking the cash rate to 4.1 per cent

The latest turmoil occurred during a week that saw the collapse of two American lenders, Silicon Valley Bank and Signature Bank, reviving fears about a rerun of the credit crunch during the 2008 Global Financial Crisis.

Mr Evans said central banks around the world would now be more concerned about financial market instability, even though inflation remains high.

‘Wildly gyrating markets are highlighting the uncertainty around this scenario,’ he said.

Australia’s unemployment rate in February fell back to a 48-year low of 3.5 per cent, with some economists worrying about a wage-price spiral feeding already high inflation.

For that reason, ANZ is still expecting two 0.25 percentage point rate hikes in April and May that would take the cash rate to 4.1 per cent.

‘Given the robustness of much of this week’s data flow, we continue to look for 25 basis points of tightening at both the April and May board meetings, giving a terminal cash rate of 4.1 per cent,’ its economists said.

Inflation is at a 32-year high of 7.8 per cent, a level well above the RBA’s 2 to 3 per cent target. 

Canstar calculated the worsening cost of living had made it even harder for Australians to get a home loan with banks required to assess a potential borrower’s ability to cope with a three percentage point increase in variable mortgage rates. 

Credit Suisse shares plunged by 24 per cent, on the Swiss Exchange, during Wednesday trade after the Saudi National Bank refused to up its 9.88 per cent stake in the Swiss bank. This stirred fears of a financial crisis until the Swiss central bank agreed to lent it $A81billion

Credit Suisse shares plunged by 24 per cent, on the Swiss Exchange, during Wednesday trade after the Saudi National Bank refused to up its 9.88 per cent stake in the Swiss bank. This stirred fears of a financial crisis until the Swiss central bank agreed to lent it $A81billion

Someone earning an average, full-time salary of $94,000 would now only be able to borrow $380,000 in order to purchase a $475,000 home with a 20 per cent mortgage deposit.

That would be insufficient to buy a median-price house in any capital city market with the most affordable big city, Perth, having a mid-point of $587,274.

A worker seeking a house, able to work from home or rent it out, would have more choices in a regional market like Taree, on the New South Wales mid-north coast, where $456,243 is the mid-point.

Those wanting to live in a capital city would have more apartment choices, where $436,567 is the median unit price in Adelaide.

As recently as early May, when the RBA cash rate was at 0.1 per cent, an Australian on the same salary could borrow $509,000 to buy a $636,250 home.

Canstar's chief commentator Steve Mickenbecker said the cost of living crisis was making it a lot harder for Australians to borrow, causing a dramatic reduction in what banks can lend (pictured is an apartment block at Waitara on Sydney's north shore)

Canstar’s chief commentator Steve Mickenbecker said the cost of living crisis was making it a lot harder for Australians to borrow, causing a dramatic reduction in what banks can lend (pictured is an apartment block at Waitara on Sydney’s north shore)

Canstar’s chief commentator Steve Mickenbecker said the cost of living crisis was making it a lot harder for Australians to borrow, causing a dramatic reduction in what banks can lend.

‘Interest rate increases have savagely cut into the borrowing capacity of home buyers,’ he told Daily Mail Australia.

Westpac is expecting the RBA to cut rates seven times in 2024 and 2025 to 2.35 per cent.

Mr  Mickenbecker said it would take a recession for that to occur.

‘That is certainly not something to be wished for,’ he said.

‘It will only restore buying power if accompanied by further property price falls.’

Should rates fall to that level, Canstar estimates someone on a $94,000 salary would be able to borrow  $427,000 to buy a $533,750 home.