NAB changes its interest rate forecast: What’s next for borrowers?
Key takeaways
- NAB has scrapped its forecast for another rate rise in August, and now expects the cash rate to stay at 4.35%.
- The Big 4 bank believes the next move is down, with the first cut now tipped for April-June 2027.
- Slowing economic growth and weaker housing markets were key reasons behind NAB's change in outlook.
After spending much of the year warning that interest rates could climb higher, NAB has made a major U-turn.
The bank no longer expects the Reserve Bank of Australia (RBA) to lift rates again in 2026.
Instead, it now believes the cash rate has peaked at 4.35%, with the next move likely to be down.
What has changed?
NAB had previously forecast further rate hikes as inflation remained stubbornly high.
But signs that households are cutting back on spending and the economy is slowing have prompted the bank to rethink its outlook.
NAB's economists now expect rate cuts to begin around April to June in 2027.
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How many rate cuts do NAB predict in 2027?
The bank predicts up to 3 interest rate cuts by the end of 2027, bringing the cash rate back to around 3.6%.
For mortgage holders, that's welcome news, although relief may still be some way off.
NAB's chief economist, Sally Auld, says that inflation is still above the RBA's target range. So, policymakers will want confidence that cost of living pressures easing before considering any cuts.
"We no longer expect the RBA to hike by 25bp in August, and now see the cash rate peaking at the current rate of 4.35% for the cycle," she says.
"The next move in the cash rate is likely to be down, but the timing is uncertain
What do the other Big 4 banks think?
Both Commonwealth Bank and ANZ have also shifted towards a "higher for longer, then lower" view, with all three major banks now expecting rate cuts during 2027 rather than further increases.
Of course, forecasts can change quickly. Earlier this year, NAB was predicting additional rate hikes before eventually cutting rates.
As recent years have shown, inflation, employment data and global events can all reshape the outlook in a matter of months.
Sources
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