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A NAB economist has said the impacts of “aggressive” rate rises won’t be felt until next year.
While the RBA is keeping its options open for October, with a 25-bp or 50-bp on the table, NAB expects it will be another 50-bp bump, taking the cash rate to 2.85 per cent before falling to a 25-bp hike in November.
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NAB chief economist Alan Oster said given it takes around 12 months for monetary policy to hit the economy the central bank’s aggressive hikes were “flying blind” and expects hikes to pause early 2023.
“But by then loan repayments will be up around $450 per month at least and the fixed loans will be rolling off,” Mr Oster said.
“Our home loan book suggests the big impact is late 2022 — early-mid 2023,” adding that borrowers feel rate hikes sooner at around three months.
While the RBA’s recent comments that mortgage repayments will be lower for new borrowers in two or more years — given the falling property prices due to rising rates — may seem out of kilter, Mr Oster said it was a fair representation of what was coming.
Given the housing boom over the past few years, up more than 20 per cent, Mr Oster said people were “almost priced out”.
NAB’s housing credit is currently growing about 8 per cent, but next year its forecast was around 3 per cent, reflecting the impacts from rising rates, he said.
“It will slow and people will get nervous. They will sit back and say I don’t need to buy that straight away, I’ll stay where I am,” Mr Oster said.
Looking overseas, the global economic growth for next year was “not good”, in fact it was some of the lowest figures seen outside the GFC and COVID.
“You’re going to get all these monetary policy impacts next year,” Mr Oster said.
For example in New Zealand, around 80 per cent of their home loans were fixed and rates had moved from around 2 per cent to closer to 6 per cent, which will cause “grief”.
In addition, the US is expected to lift its cash rate another 75 bps on 21 September and the US economy had already “started to struggle” following two quarters of negative growth.
Despite the rising rate environment and global escalating inflation, Mr Oster said Australia remained in good shape, but the bank was keeping a “close eye” on certain borrowers.
For example, economists were worried about people who had bought in the last 12 months and have one income. However, they were showing no signs of stress “yet”.
“Do we think it’s going to be a problem, yes, but not yet,” Mr Oster said.
[Related: Rate hikes could lower repayments: RBA]
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