The Commonwealth Bank of Australia (CBA) has increased its fixed mortgage rates by a huge 1.4 per cent, just days before the next Reserve Bank board meeting.
Key points:
- CBA’s lowest fixed rate is now just under 5 per cent
- The bank has lifted fixed mortgage rates by a large 1.4 per cent for one- to five-year loans
- Meanwhile, the Reserve Bank is tipped to increase interest rates again next week
Fixed mortgage rates for owner-occupiers and investors, for one- to five-year loans, have all been pushed higher.
However, the bank has cut its lowest variable home loan rate by 0.15 percentage points, down to 2.79 per cent, for new customers with a 30 per cent deposit.
RateCity.com.au research director Sally Tindall the size of the rate hikes are unlike anything she has seen from the CBA.
She expects other major banks will lift rates in response.
Fixed rates lifted quickly
“We haven’t seen one-off hikes of this size and scale from [the] CBA in our records,” Ms Tindall said on Thursday.
“The bank is responding to the rising cost of fixed-rate funding and a market that refuses to believe the Reserve Bank will stop hiking the cash rate at around 2.50 per cent.
“Less than a year ago, CBA was still offering one fixed rate under 2 per cent. Today the bank’s lowest fixed rate is just under 5 per cent, while the majority are well over 6 per cent,” she said.
“It’s incredible to see fixed rates move this dramatically in such a short space of time,” she said.
Ms Tindall said she expects other major banks will follow CBA’s lead.
“Westpac and NAB’s fixed rates are now, in many cases, over a percentage point lower,” she said.
“It’s only a matter of time before these banks hike fixed rates again.
“While CBA might have turned its back on competition in the fixed rate sector, it has got its eyes squarely focused on reeling in new variable rate customers.”
Reserve Bank expected to lift rates again
The RBA board will meet next week, on Tuesday, to discuss lifting the cash rate target.
Earlier this month, the board increased the cash rate target from 0.35 per cent to 0.85 per cent.
Economists think it will lift the target again next week, in its attempt to convince the population that it hasn’t lost control of inflation.
The headline rate of consumer inflation was 3 per cent in the September quarter last year, and it hit 5.1 per cent in the March quarter.
When the RBA lifted the cash rate target to 0.85 per cent this month, all four major banks lifted their rates in response.
RBA governor Philip Lowe warned last week that inflation was increasingly coming from within Australia.
He said the share of goods and services in the consumer price index (CPI) basket that were experiencing annual price increases of 3 per cent or more, their highest increase since 1990.
However, he said, he didn’t see a recession occurring in Australia at this stage, partly because of the underlying strength in the labour market.
On Thursday, new Australian Bureau of Statistics data showed there were 480,100 job vacancies in May, up 13.8 per cent since February.
The level of job vacancies in May 2022 was 111.1 per cent higher than in February 2020, prior to the start of the pandemic.
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