Commonwealth Bank delivers a major blow to Aussies with a mortgage in latest forecast: Here's what it means for you

The Commonwealth Bank is now warning Australian borrowers to brace for a possible interest rate rise.

Australia's biggest home lender has changed its forecasts to only have one rate cut in 2024 instead of three as recently forecast.

But CBA's head of Australian economics Gareth Aird said a rate rise in coming months could not be ruled out, given underlying measures of inflation are still on the high side.

Another rate hike in 2024 would take the cash rate to 4.6 per cent, which would be the highest level since November 2011, and add to the most aggressive hikes since 1989.

'The near-term risk sits with an interest rate hike,' he said.

'But we expect the RBA to be on hold over the next six months given the economy is still contracting on a per capita basis, inflation is forecast to fall further and the labour market is anticipated to loosen.'

The Commonwealth Bank has adjusted its forecasts to have the Reserve Bank of Australia cutting rates in November instead of September.

It now only has one rate cut for 2024, compared with a recent prediction of three cuts this year. 

In 2024 and 2025, CBA is now predicting five rate cuts instead of six, that would take the Reserve Bank cash rate back down to 3.1 per cent, instead of 2.85 per cent.

'We now see a more elongated and conservative easing cycle than previously expected,' Mr Aird said.

The 30-day interbank futures market has the Reserve Bank now leaving the cash rate on hold at a 12-year high of 4.35 per cent in 2024.  

Bond market yields, or the annual amount investors are paid to hold government debt, have also risen since Wednesday last week, suggesting financial markets are bracing for another possible hike in Australia.

Interest rate pricing changed after the Australian Bureau of Statistics revealed headline inflation in the March quarter rose by 3.6 per cent, which was higher than market expectations of a 3.5 per cent increase.  

But the underlying measures of inflation, stripping out big price increases and decreases, were particularly alarming.

The weighted median, showing price rises in the middle of the range, had inflation rising by 4.4 per cent.

The trimmed mean, based on an average without volatile goods like petrol and vegetables, showed prices rising by 4 per cent.

This would alarm the RBA considering it had, in February, expected this measure to ease to 3.6 per cent by June 2024. 

The unemployment rate of 3.8 per cent is also well below the Reserve Bank's forecast of it rising to 4.2 per cent by mid-year, fuelling concerns about wages pushing up costs. 

But Mr Aird said unemployment was still likely to rise as higher interest rates led to spending cuts.

'Discretionary inflation is likely to fall further as Australian households continue to tighten their belts,' he said.

'This in turn will see the labour market loosen and wages pressures dissipate. 

'As wages growth eases it will put downward pressure on cost push inflation in the services sector where wages growth is generally the dominant driver of price rises (note that dynamic is not applicable to rents, which are considered a service).'

A record 548,800 migrants, on a net basis, moved to Australia in the year to September, which Mr Aird said had fuelled inflationary pressures by boosting demand for goods and services.

'The surge in Australia’s population over the past eighteen months has been extraordinary,' he said.

'The surge in population growth has boosted aggregate demand in the economy. 

'In turn this has somewhat masked the per capita decline in real consumer spending. 

'More importantly from a monetary policy perspective, there are implications for inflation.'