RBA Rate Hike Expected Despite Lenders Cutting Mortgage Rates

Major Banks Diverge on RBA Rate Hike Timeline

National Australia Bank now forecasts a 0.25 percentage point increase at the central bank’s September meeting, joining Commonwealth Bank and ANZ in predicting further monetary tightening this year. Commonwealth Bank and ANZ expect their anticipated move to land in November, according to Canstar. Westpac stands apart from its major bank peers, predicting the Reserve Bank’s next policy move will instead be a rate cut in August 2027.

Persistent underlying inflation is driving the shift among major lenders, according to Canstar data insights director Sally Tindall. “Sticky core inflation is backing the RBA into a corner, with NAB the latest major to abandon hopes of a pause,” Ms Tindall said. Data published by the Australian Bureau of Statistics on August 26 revealed that annual headline inflation slowed to 3.5 per cent through July, marking a decline from the 3.8 per cent rate recorded a month prior. However, trimmed mean inflation, which serves as the central bank’s preferred underlying measure, remained at 3.6 per cent. Household spending figures released on August 27 added to the pressure, rising 7 per cent in nominal terms compared to July last year, alongside a 7.8 per cent increase in discretionary spending.

Lenders Cut Variable Home Loan Rates to Fight for Customers

Even as economic indicators point toward tighter monetary policy, lenders are actively reducing variable rates for new customers and refinancers to stimulate slowing application volumes. Canstar data shows 35 lenders have lowered variable home loan rates since June 1, bringing the total number of institutions offering at least one variable loan below 6 per cent to 52. Fourteen lenders joined this sub-6 per cent group over a three-month period, with the lowest variable rates tracked by Canstar starting at 5.69 per cent.

Berti Financial director and senior finance broker Daniel Berti said lenders have become noticeably more aggressive in trying to secure mortgage business as overall volumes soften. “Lenders are offering better pricing, especially major banks, sitting under 6 per cent,” Mr Berti said. “The banks have seen that their volume has dropped, so they are becoming a lot more competitive.” Mr Berti noted that lending competition extends well beyond advertised rates, with major institutions showing a willingness to approve policy exceptions to win new business.

Calculate the Impact of RBA Rate Increases on Monthly Repayments

Calculations performed by Canstar show that a rate increase in September would raise monthly payments by roughly $91 for a $600,000 home loan that has 25 years left to run. That financial hit escalates to about $122 a month on an $800,000 mortgage and $152 a month on a $1 million loan. If a second increase materializes in November as predicted by major bank forecasts, borrowers face an additional $92 a month on a $600,000 loan, bringing the cumulative increase across back-to-back hikes to $183 a month.

Frequently Asked Questions

What do RBA rate hikes mean for my monthly mortgage repayments?

A 0.25 percentage point increase adds approximately $91 per month to a $600,000 mortgage with 25 years remaining, according to Canstar analysis.

Why are banks cutting mortgage rates if interest rates might rise?

Lenders are dropping variable rates below 6 per cent to fight for customers amidst softening loan application volumes, according to finance broker Daniel Berti.

How can I avoid paying a loyalty tax on my home loan?

Borrowers with variable rates starting with a six or seven should shop around for sub-6 per cent deals or negotiate with their current lender to secure a better rate.