Unfortunately for borrowers, interest rates have been rising rapidly over the last 12 months.
Central banks have been raising rates in an effort to tame inflation, which has reared its ugly head and sent prices in your local Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) supermarkets hurtling higher.
At the start of the month, the market was expecting rates to continue rising globally over the course of the year. However, a much softer-than-expected inflation reading in the United States last week has raised a few eyebrows.
That reading has sparked hopes that inflation is now under control and further rate hikes may not be necessary.
Are interest rate hikes over?
The economics team at Westpac Banking Corp (ASX: WBC) has been looking at recent economic data and has some bad news for borrowers.
Australia's oldest bank continues to expect the Reserve Bank to increase rates by 25 basis points at each of the next two meetings despite the upcoming change of governor. This will take the cash rate from 4.1% to a peak of 4.6% in September. Chief economist Bill Evans said:
As Governor until mid-September, Lowe will be chairing his last two Board meetings in August and September. We see no reason to change our forecast that the Board will decide to raise the cash rate by 0.25% at the upcoming August meeting with a further increase likely at the September meeting.
Westpac then expects rates to be held at this level until the middle of next year, before eventually being brought down to 3.85% by December 2024.
This view is largely shared by the market judging by the latest cash rate futures. Though, current futures suggest a rate closer to 4.1% at the end of 2024.
Time will tell what happens with interest rates. But hopefully, there will be some relief for homeowners in the near future.
